Bahl - Ib Cad Procedural Manual - Final 2018

CREDIT ADMINISTRATION MANUAL
ISLAMIC BANKING DIVISION

2018
FOR INFORMATION, RECORD & COMPLIANCE OF
CAD HUBS ISLAMIC BANKING ACTIVITIES
This document provides guidance and is exclusively for use by the staff members of Bank Alhabib Limited. Any act of
divulgence shall be viewed very seriously and shall warrant disciplinary/penal action.
DOCUMENT CONTROLLED BY:
Designation /
Name Date Signature
Unit
Document Bank AL Habib CAD Hub
Holder: Limited Islamic Banking
Approved By: Syed Zulfiqar Ali Head - CCAD

Zaidi
Reviewed By: Zaman Ahmed Head - CAD

Zuberi Islamic Banking
Prepared By: Muhammad Farhan Manager - CAD

Mirza Islamic Banking
Credit Division -
Islamic Banking:
Shariah
Advisory
Committee:
Compliance
Division:
Risk
Management
Division:
Audit Division:
Remarks:

Board of Directors Approval Date:
TABLE OF CONTENTS:
Bank Al Habib Limited - Credit Administration Department Page 2
Islamic Banking
Manual Version: MFM/1.0 / 2018
S.No: Particulars Page No.
1. INTRODUCTION OF CREDIT ADMINISTRATION MANUAL [CAM] 10
2. OBJECTIVE OF MANUAL 10 - 11
3. MAINTENANCE OF MANUAL 11
3.1 Custody, Distribution & Access 11
4. GOVERNING RULES & REGULATIONS 11
5. ISLAMIC BANKING 12
5.1 Small Enterprise 12
5.2 Medium Enterprise 12
5.3 Commercial Banking 13
5.4 Corporate Banking 13
5.5 Clean Financing 13
6. CREDIT ADMINISTRATION DEPARTMENT (CAD) 14
7. RESPONSIBILITIES OF HEAD CAD ISLAMIC BANKING 14
8. ROLES OF CAD HUB ISLAMIC BANKING 15
9. STRUCTURE OF CAD 16
10. ORGANIZATIONAL STRUCTURE OF CAD HUB IB KARACHI 17
11. FUNCTIONS OF CREDIT ADMINISTRATION DEPARTMENT 18
11.1 Core Pre & Post Disbursement Formalities 18 – 20
11.2 Miscellaneous Tasks 21
11.3 General Guidelines 21 - 22
12. CAD HUB ISLAMIC BANKING 23
13. DOCUMENTATION UNIT 24
14. GENERAL DOCUMENTS 24
14.1 Financing / Transactional Documentation Parameters 24
14.2 Compliance to SBP Prudential Regulations & Shariah Guidelines 24
14.3 Adherence to SBP / Local Laws 25

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14.4 Documentation request from the branch 25
14.5 Submission of copies of approvals by Credit Division 25
14.6 Financing / Security Documentation Guidelines 25 – 26
14.7 Information / Documents Required by CAD Hub Islamic Banking 26 – 28
15. FINANCING / TRANSACTIONAL AGREEMENTS 29
15.1 Types of Credit Facilities 29 – 31
15.2 Facility Offer Letter (FOL) 31 – 32
15.3 Master Murabaha Facility Agreement (MMFA) 32
15.4 Agency Arrangements 32
15.5 Sight Letter of Credit Facility Under Murabaha Arrangement 32 - 33
15.6 LC without MMFA (Sight / Usance) 33
15.7 Ijarah / Lease Facility Agreement for Plant & Machinery 33
15.8 Master Ijarah / Lease Facility Agreement for Vehicles 33
15.9 Master Diminishing Musharaka Agreement for Assets 34
15.10 Master Musawama Agreement 34
15.11 Master Istisna Agreement 34
15.12 Running Musharaka Agreement 34
15.13 Islamic Long Term Finance Facility [ILTFF] 35
15.14 Sale and Lease Back (SLB Under Ijarah & DM) 35
16. CALCULATION OF PRICING 35
17. SECURITY SPECIFIC CHARGE DOCUMENTS 36
17.1 Types of Securities 36 – 37
17.2 Margins 37
17.3 Lien on Accounts / Deposit / TDRs 38
17.4 Pledge of Shares etc. 38
17.5 Pledge of Goods 39
17.6 Hypothecation charge on Fixed Assets and Current Assets 39
17.6.1 Fresh charge 40
17.6.2 Amendment in charge 40
17.6.3 Other Guidelines 40
17.7 Equitable / Registered Mortgage of Land and Building 40
17.7.1 Types of mortgage 41
17.7.2 Constructive Charge 41
17.7.3 Creating of Charge 41

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17.7.4 Amendment in charge 42
17.8 Bank Guarantees 42
17.8.1 Types of Guarantees Available 42
17.9 Personal / Corporate / Counter / Financial Guarantees 42
17.9.1 Regulation SME R-3: Personal Guarantee 42
17.9.2 Personal guarantee 43
17.9.3 Corporate Guarantee 43
17.9.4 Counter Guarantee 43
17.9.5 Financial Guarantee 44
17.9.6 Draft of Guarantee 44
17.9.7 Financial guarantees in Foreign Currency 44
17.9.8 Authentication of Financial Guarantee 45
17.10 Title of Lease Assets & Security Deposit 45
17.11 Direct Lease Financing 45
17.12 Assignment over Receivables 45
17.13 Sub-Ordination Agreement 46
17.14 Other Guidelines 46
18. DAC ISSUANCE UNIT 47
18.1 Scrutiny / Review Parameters 48 – 50
19. PROCESS FLOWS 50
20. DOCUMENTS REQUIRED FOR REVIEW 50
20.1 General Documents for Review 50
21. NATURE / TYPE OF CUSTOMERS 51
21.1 Individual (Single or Joint) 51
21.2 Proprietorship 51
21.3 Partnership 52
21.3.1 Partnership Resolution 52
21.3.2 CTC of Partnership Deed (Registered / Un Registered) 52 – 53
21.4 Joint Stocks Company 53
21.4.1 Board Resolution (BR) (For Limited Companies registered with SECP) 54
21.4.2 Certified copies of following documents by SECP
54 – 55
21.4.3 Memorandum and Article of Association
21.4.4 Certificate of Incorporation 55
21.4.5 Certificate of Commencement of Business 55
21.4.6 Form – A / Form – IV 55
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21.4.7 Form – 29 55
21.5
Bylaws / Trust Deed (For Associations, Clubs and Societies etc) 56
21.6 Government Departments 56 - 57

22. NATURE OF SECURITY 57
22.1 Credit Approval 57
22.2 Deferrals and Exceptions / Waivers Policy 57
22.1.1 Other Deferral / Waiver Requests 57
22.2.2 Extension in Deferrals 58
22.2.3 CAD Approach for Deferrals / Waivers 58
23. SCRUTINY OF FOL, FINANCING & SECURITY DOCUMENTS 58
23.1 Accepting change in our standard documents 59
23.2 Witnessing and Signing of Documents 59
23.3 Lien over Cash Securities 59 – 60
23.3.1 Creation of lien over cash securities/Deposit Certificates of BAHL 61
Creation of lien over Cash securities/Deposit certificates of the other
23.3.2 61
Banks/FIs
23.3.3 Proof of Lien Marking 61
23.3.4 Term Deposits Receipts 62
23.4 Registration of Hypothecation charge 62 – 63
23.4.1 Registration of our Bank’s Charge (For Limited Companies Only) 63 – 64
23.4.2 Pari Passu Hypothecation Charge 64
23.4.3 Pre and Post disbursement Monitoring of Hypothecation Cases 65
23.4.4 Creation of Charge / Securities in Joint Arrangement 65 – 66
23.5 Pledge of Goods & Shares 66 – 67
23.5.1 Pledge of Commodities 67 – 68
23.5.2 Storage arrangements 68
23.5.3 Rented / Third Party God-own 68
23.5.4 List of Authorized Signatories 68
23.5.5 Pledge of Shares 69 – 70
23.6 Property as Collateral 70
23.6.1 Equitable mortgage 71
23.6.2 Token / Legal mortgage 71
23.6.3 Constructive Mortgage Charge 72

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23.6.4 Constructive Memorandum of Deposit of Title Deeds 72
23.6.5 Pre & Post Mortgage Legal Opinions 72
23.6.6 Registration of charge with SECP 73
23.6.7 Latest Search Report from SECP & NOCs (For Ltd Companies) 73
MONITORING OF HYPOTHECATED/ PLEDGED/ LEASED /
24. DIMINISHING MUSHARAKAH / MORTGAGED ASSETS’ 74
VALUATION / INSPECTION REPORTS
24.1 Valuations Of Hypothecated/Leased/Mortgaged Assets 74 – 75
24.2 Monitoring of Pledged Stocks 76
24.3 Pledge Stock Inspection 77
24.4 Joint Stock Inspection 77 – 78
MONITORING OF STOCK REPORTS OF HYPOTHECATED
25. 78
STOCKS/ RECEIVABLES
25.1 Checking of Stock Reports at CAD’s End 79
25.2 Checking of Drawing Powers 79
MONITORING OF TAKAFUL/ INSURANCE POLICIES OF
26. HYPOTHECATED/ PLEDGED/ LEASED / DIMINISHING 80
MUSHARAKA / MORTGAGED ASSETS
26.1 Insurance / Takaful Coverage 80
26.2 Insurance / Takaful – per risk exposure & Standard Grid 80 – 81
26.3 Guidelines for Accepting Insurance / Takaful Policies 81 – 82
27. SWAPPING OF LIABILITIES 82 – 83
28. SYNDICATION 84
29. ISSUANCE OF DAC 85
30. ISSUANCE OF NO OBJECTION CERTIFICATE [NOC] 86
31. REPORTING / MIS UNIT 88
VAULT MANAGEMENT [CUSTODIAN SERVICES, VAULT
32. 90
OPERATIONS AND MOVEMENT OF SECURITIES]
32.1 Safe-In-Safe-Out [SISO] of Financing / Security Documents 90
Custody / scanning of documents / maintaining (SISO) record
32.2 a) Custodian Services 90 – 91
b) Vault Operations
32.3 Movement of Security (Release of Security Documents) 91 – 92
32.4 Checking Points at CAD’s End 92 – 93
32.5 Replacement / Substitution of Security 93
32.6 Cancellation of Security Documents 93
32.7 Vacation of Charge Registered with SECP – Limited Companies 94
Creation, modification and vacation of charges over assets of Partnership,
32.8 94
Proprietorship Firms and Trusts, Associations/Clubs

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33. LIMIT FEEDING UNIT 95
33.1 Responsibility for limit feeding 96
33.2 Operational Activities to be performed at CAD Hubs 96
33.3 Guidelines for Feeding of Insurance / Takaful Policies 97
33.4 Request mechanism for Limit Feeding by BUs / IBBs 97
33.5 Authorization / Cancellation of Limits 98
DISBURSEMENT MECHANISM BY CENTRAL CREDIT
34. 98
OPERATIONS DEPARTMENT [CCOD]
35. CIRCULARS 99 -

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THIS MANUAL SHOULD BE READ IN CONTINUATION OF
"CREDIT PROCEDURE MANUAL" AND "ISLAMIC BANKING
CREDIT POLICY"

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1. INTRODUCTION OF CREDIT ADMINISTRATION MANUAL (CAM):
Credit Administration Manual has been prepared for the guidance of Credit Administration
Department (CAD) staff and for other related departments’ for their ready reference. Its
main purpose is to assist CAD staff in performing their routine tasks. It is meant to serve as
a guide for interpretation of policies and procedures in area of CAD including Shariah
Parameters.
The core purpose of this CAM is to establish self-acting standards, providing a clear
understanding of responsibilities of staff in Credit Administration Division (CAD)
throughout the CAD Hubs of the bank. The CAM will ensure better understanding amongst
the CAD staff in regard to performance of their duties. It is implied that the staff would
comprehend this CAM and the same would become a part of their daily routine to perform
unambiguously as per guidelines provided herein.
The policies and procedures in these guidelines will be reviewed periodically and to be
revised from time-to-time. Revisions will be issued as and when the requirement arises. At
the discretion of the management, revisions and introduction of new policy (ies) may be
introduced after obtaining feedback from the concerned authorities.
2. OBJECTIVE OF THE MANUAL:
The Manual has been developed with the prime objective to provide directional guidelines
to all stakeholders that will improve the risk management & internal control function
culture, establish minimum standards for segregation of duties and responsibilities, and
assist in the ongoing improvement of the CAD function at BAHL while achieving Mission &
Vision of the Bank.
Key objectives of CAD Manual are summarized as follows:-
i. To ensure that effective practices are followed which will contribute towards the
achievement of the overall objectives and correlate with the Bank vision.
ii. Ensuring compliance in letter and in spirit to the regulatory framework set out by
the State bank of Pakistan (SBP) so that Banks overall credit functions remains
aligned with the regulatory requirements and the framework.
iii. To ensure compliance of Shariah Parameters in all day to day activities.
iv. CAD Procedures/processes must incorporate transparency and accountability.

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v.
Provide the participants with an overview of the CAD process & ensuring implementation
of standardized policy.
vi. Providing overall guidelines rules applicable on all the credit related products.
vii. The manual serves as a tool for training of the relevant personnel so that each officer
has a common understanding of the working of the Credit Administration Division.
viii. To facilitate effective monitoring and compliance by regular internal Audit ensuring
compliance to statutory & non-statutory regulations and de-risks the business.
ix. Individuals who take or manage risks clearly understand them in order to protect
the Bank from avoidable risks.
x. CAD Processes are in line with the corporate goals, mission and the Bank-wide
strategy set by the Board of Directors and allow the Bank to undertake more
productive risk-taking activities or restrict high risk/ low return activities.
3. MAINTENANCE OF MANUAL:
The creation and updating of the documents shall be initiated and processed by all
stakeholders involve in the process i.e. review, recommending and approval authorities.
Maintenance of the manual covers the following aspects:
i. To ensure creation of all related policy, procedure documents & systems and will be
put forth for reviews by other stakeholders & subsequent approval from competent
authorities.
ii. Policies will be reviewed every 02 years and any changes if any, considered essential
may be implemented with immediate effect & would be included post facto basis.
3.1 Custody, Distribution & Access
The manual is the property of the bank and it should not be shown to, or its contents
discussed with anyone who is not in the employment of the bank unless specifically
authorized by the concerned. Photocopying or reproducing of the contents for other than
bank use is prohibited. However, access to this manual shall not be restricted from such
external parties who are entitled to it in accordance with the provision of any law for the
time being in force.
4. GOVERNING RULES & REGULATIONS:
Compliance of all applicable regulatory & other internal policies /procedural guidelines to
remain intact at all times.
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5. ISLAMIC BANKING:
Islamic banking is defined as banking system which is in consonance with the spirit, ethos
and value system of Islam and governed by the principles laid down by Islamic Shariah.
Interest free banking is a narrow concept denoting a number of banking instruments or
operations which avoid interest. Islamic banking, the more general term, is based not only
to avoid interest-based transactions prohibited in Islamic Shariah but also to avoid unethical
and un-social practices. In practical sense, Islamic Banking is the transformation of
conventional money lending into transactions based on tangible assets and real services.
The model of Islamic banking system leads towards the achievement of a system which
helps achieve economic Prosperity.
BAHL - Islamic Banking is a client facing business unit which caters to the specific financing
requirements of Islamic Banking customers. Such exposures are governed under the
relevant SBP PRs (Corporate / Commercial, Medium Enterprise, Small Enterprise, or
Consumer Finance) and respective Shariah requirements. These customers have specialized
product requirements which conform to the requirements of Islamic Shariah Principles. To
maintain this distinction, the bank maintains a separate branch network for such customers
as under as well as maintains a separate balance sheet.
5.1 Small Enterprise (SE)
The SE customers may typically consist of small sized companies, partnerships, and sole
proprietorships. Exposures classified under SE are those where (attracting all three will
qualify for Small Enterprise or as prescribed by SBP from time to time).
Exposures placed under SE are managed under the SBP Prudential Regulations for Small
Enterprises and applicable Shariah Standards and guidelines.
5.2 Medium Enterprise (ME)
IBG also serves the ME customers which may typically consist of medium sized companies,
partnerships, and sole proprietorships. Exposures classified under ME are those where
(attracting all three will qualify for Medium Enterprise or as prescribed by SBP from time to
time).
Exposures placed under ME are managed under the SBP Prudential Regulations for
Medium Enterprises and applicable Shariah Standards and guidelines.

Islamic Banking
5.3 Commercial Banking
IBG also caters to the requirements of Commercial customers which may typically consist of
medium-to-large sized companies, partnerships, and sole proprietorships. Any financing
customer not meeting the criteria of ‘SE’ and ‘ME’, and not meeting the Corporate cut either,
falls under Commercial segment and will attract Corporate PRs.
Exposures placed under Commercial Banking are managed under the SBP Prudential
Regulations for Corporate Banking as well as ME Financing depending on the customer
profile and applicable Shariah Standards and guidelines.
5.4 Corporate Banking
IBG also caters to the requirements of corporate customers which may typically consist of
government organizations, multinational companies, large sized companies as well as
economic groups. Exposures classified under Corporate Banking are those where:
Exposures placed under Corporate are managed under the SBP Prudential Regulations for
Corporate; however certain exposures may fall under the ambit of SBP PRs for Small /
Medium Enterprises and applicable Shariah Standards and guidelines.
5.5 Clean Financing
For reputable and established customers, a limited range of credit facilities may be extended
on a clean basis. These facilities are related to Staff, trade based exposure, such as import
LCs (Sight or Usance). However, when considering these limits, care should be taken to
ensure that these limits are part of the core operating cycle of the company and are in-line
with the business requirements. Though clean in terms of collateral, these facilities are
secured against a lien over import documents, trust receipt, etc. However, Bank shall ensure
that the aggregate exposure against all their clean facilities (as defined in SBP PRs) shall not,
at any point in time, exceed the exposure cap as prescribed by SBP from time to time.

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6.
CREDIT ADMINISTRATION DEPARTMENT (CAD):
Credit Administration has always been the core business and backbone of Banks / Financial
institution that plays a vital role in managing the Bank's credit in order to build and
maintain a healthy portfolio. Role of Credit Administration is basically a series of functions
performed at back office that support and control disbursement and monitoring of credit
facilities extended.
The over-all objective of the Credit Administration is to provide independent assurance to

management that lending activities post approvals are being performed independently in
control centralized environment and efficient manner. CAD through its Hubs situated in
different location of country mainly performs following functions for IBG portfolio in
centralized environment.
7. RESPONSIBILITIES OF HEAD CAD ISLAMIC BANKING:
i. To effectively & efficiently manage the Credit Administration activities of the bank
at all designated CAD Hubs across Pakistan in order to build and maintain a healthy
credit portfolio.
ii. To ensure proper controls and compliance of applicable rules, procedures,

regulatory & policy guidelines including Shariah parameters to avoid any
contingency.
iii. Manage day-to-day operations of the Credit Administration Department by

providing guidance in the related area, encouraging teamwork, and facilitating
related professional work processes in order to achieve high performance standards
and ensure that employees’ activities are performed in a timely, efficient, and
effective manner.
iv. Report on a regular basis to the Head CAD - CCAD on the operational activities of
CAD Hub Islamic Banking, challenges and issues faced, mitigations taken, etc., as
required to keep management informed and updated on the function’s activities.
v. To ensure maintaining positive audit rating [Internal / External / Shariah] in all

designated CAD Hubs and monitor prompt rectification of audit observations to
close audit file within prescribed timeline.
vi. Identify common and repetitive observations & to take concrete steps for eliminating
them so as to avoid penalties from regulators.
vii. All hubs are consulting with them before taking any steps / decision which are
outside the jurisdiction of the approved policy.

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8.
ROLES OF CAD HUB ISLAMIC BANKING:
The primary scope of establishing Credit Administration Department (CAD) is to provide

administrative support for the lending activities of the bank and to ensure that;
i. CAD Hub Islamic Banking at BAHL performs Back Office Supporting role for
Business Activities of Islamic Banking.
ii. CAD Staff not to involve in preparation of Credit Line Proposal (CLP), Approvals,
direct interaction with customers or any front office related activity.
iii. Bank’s exposure is properly securitized in accordance with the terms of the
Approval of credit facilities in compliance with Bank’s laid down policies and
procedures in order to mitigate the chances of losses arising from incomplete
security documentation
iv. An effective monitoring and follow-up system (i.e. for documentation, collateral,
etc.) is in place and all irregularities are recorded and reported as per required
formats for regularization in a minimum time scale.
v. All Financing & Security loan - documentation relating to transactions is scrutinized,

verified to be legally enforceable and lodged in the vault by the branches. These
securities should be duly entered in the Safe-In-Safe-Out Register.
vi. All limits, Profit rates mark-up rates- and security details, Policies, Stocks &
Receivable coverage, valuations are properly fed and maintained in Al Habib
banking system.
vii. To facilitate customer by pursuing Banking Regulations & Policies, Shariah

parameters and is to safeguard bank's interest at all times.

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9. STRUCTURE OF CAD:
For smooth process flow of CAD Hub Islamic Banking activities at BAHL, Five (05)
dedicated platforms are established on pan Pakistan basis called as Hubs which are
performing their core functions supervised by CAD Head Islamic Banking under the
supervision of Head CAD - CCAD.
CAD platforms are comprised of:-
a. CAD Hub Karachi

b. CAD Hub Lahore
c. CAD Hub Multan
d. CAD Hub Faisalabad
e. CAD Hub Islamabad
The number of the Hubs may be increased according to the work requirements.
i. All CAD Hubs are internally split into Documentation, Review, MIS Reporting,
Vault Management & Limit Feeding Units whereas Operations Unit is being
supervised by branches under the supervision of CAD Operations IBD.
ii. In view of the volume of credit portfolio necessary reformation is made at Hubs time
to time for better results, with this perception & in order to extend swift services
pertaining to Documentation & Review activities at all units.
iii. Head CAD may use its discretion to make necessary structural changes in all/any
CAD Hubs as & when feel appropriate for better/smooth delivery of services so as
to make proper utilization of available resource, with prior concurrence of Head
CAD - CCAD.
iv. The above Hubs perform CAD activities of branches across Pakistan & any new /
upcoming branch will be under the umbrella of CAD Hub Islamic Banking -
Karachi.

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10. ORGANIZATIONAL STRUCTURE OF CAD HUB ISLAMIC BANKING KARACHI:
Syed
Syed Zulfiqar
Zulfiqar Ali
Ali Zaidi
Zaidi
(Head of
(Head of CCAD)
CCAD)
Zaman Ahmed Zuberi

Zaman Ahmed Zuberi
Head
Head of
of CAD
CAD Hub
Hub Islamic
Islamic Banking
Banking
(Senior Chief manager)
(Senior Chief manager)
Scanning
Scanning and
and Vault
Vault Limit
Documentation DAC
DAC issuance
issuance Unit
Unit Pledge/MIS
Pledge/MIS reporting
reporting Unit
Unit Limit Unit
Unit
Documentation Unit
Unit Management
Management Unit
Unit
Salman Kamil Ebad Kamran

Kamran Ahmad
Ahmad Siddiqui
Siddiqui
Salman Kamil Kamran Ahmad Siddiqui
Siddiqui Ebad ul
ul Haq
Haq Siddiqui
Siddiqui Kamran
Kamran Ahmad Siddiqui
Ahmad Siddiqui
Kamran Ahmad (Chief
(Chief Manager)
Manager)
(Senior
(Senior Manager)
Manager) (Manager)
(Manager) (Chief
(Chief Manager)
Manager)
(Chief Manager)
(Chief Manager)
Muhammad
Muhammad Farhan
Farhan Muhammad
Muhammad Ali Abdi
Ali Abdi
Muhammad
Muhammad Farhan Mariya
Yousuf
Yousuf Ansari
Ansari
Farhan Mariya Kulsoom
Kulsoom Mirza
Mirza (Assistant
Mirza
Mirza (OG-II) (Assistant Manager)
Manager)
(OG-I)
(OG-I) (OG-II) (Manager))
(Manager))
(Manager)
(Manager)
Muhammad Yousuf Ansari

Yousuf Ansari
Mehwish
Mehwish Hakeem
Hakeem Muhammad AliAli Abdi
Abdi Muhammad
Muhammad Ali Abdi
Ali Abdi
Shahzad
Shahzad (Assistant Manager) (Assistant Manager) (OG-I)
(OG-I)
(Assistant Manager) (Assistant Manager)
(OG-I)
(OG-I)
Mariya Kulsoom Mariya Kulsoom

Mariya Kulsoom Mehwish
Mehwish Hakeem
Hakeem
Mariya Kulsoom
Faizan Ahmad (OG-II) Shahzad
Shahzad
Faizan Ahmad (OG-II)
(OG-II) (OG-II)
(OG-II) (OG-I)
(OG-I)
(OG-II)
Mariya
Mariya Kulsoom
Kulsoom
TBH
TBH Faizan Ahmad
Faizan Ahmad (OG-II)
Wajid (OG-II)
Wajid Hashmi
Hashmi (OG-II)
(OG-II)

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11. FUNCTIONS OF CREDIT ADMINISTRATION DEPARTMENT:
Administration of the credit portfolio of the Bank is an essential part of the credit
process. Credit Administration performs a series of functions at back office that
support and control disbursement and monitoring of credit facilities extended.
These functions include documents preparation, conducting reviews, issuance of
DACs, review of Insurance / Takaful Policies, arranging valuations, preparation of
various MIS reports, Satisfactory SBP, Internal & Shariah Audit/Reviews, and
maintaining custody of credit related security / charge documentation in
centralized environment.
For smooth process flow of CAD Hub Islamic Banking activities, the CAD functions
are broadly bifurcated in Two (02) main segments one is Documentation Unit and
other is Collateral & Security perfection Unit called DAC Unit.
At present BAHL’s centralized CAD mainly performs below listed functions majorly
categorized into Three (03) parts as under:
11.1 Core Pre & Post Disbursement Formalities
i. Scrutiny of Approval to ensure that the same is approved by competent authorities

in line with the BAHL’s approved Credit Matrix Issued time to time.
ii. Preparation of FOL / Security / Charge Documentation as per Approval [AF - 1, AF

- 2, AF - 3, HR Approval, IOMs] duly approved by competent authorities. CAD to
ensure that the documentation is correct, complete and conforms to the approved
facilities (i.e. blank spaces are properly filled, documents are dated, signed and
stamped, the person signing the documents is authorized to execute such
documents, signatures are verified, etc.).
iii. Review & Scrutiny of executed Financing / Charge/ Security documents

and to ensure that all securities (including collateral security) have been obtained
and perfected in accordance with the terms and conditions of the formal approval,
banking policies & Shariah guidelines.
iv. Issuance of DAC (Disbursement Authorization Certificate) for Funded as well as

Contingent Facilities upon perfection of Documentation & Security Arrangements as
per approval terms.
CAD hubs will issue DAC in sequential / serial order (month wise) which will be
recorded in DAC Issuance Register. In addition to manual register, CAD hubs
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should also maintain its replica in excel file format for ease of reference and sorting
of data according to specific requirements.
v. Liaison with Product Development and Shariah Compliance for day to day
activities.
vi. To arrange Pre and post mortgage legal opinion in respect of mortgaged property.
vii. To ensure that Insurance / Takaful Policies are being obtained according to the
stocks declared by the customer in periodic Hypothecation / Pledge stock reports
(irrespective of the outstanding there against). In case of Hypothecation, Branches
should ensure that customers have obtained / provided the Insurance/Takaful
coverage upto the maximum value of stocks being maintained by them during each
month. Premium Payment receipts must be obtained along with the
Insurance/Takaful policies.
Similarly, Insurance/Takaful for mortgaged properties (constructed) should

adequately cover the market value of building / machineries / furniture and fixtures
i.e. excluding land (as per valuation report).
To check the risks covered in insurance/Takaful policies submitted by the borrowers

and also to seek confirmation of these policies (including premium payment
receipts) from issuing companies in respect of their genuineness and authenticity.
Branches are required to submit the Original/CTC of all Insurance policies along-
with their respective clauses and Premium payment receipt to their respective CAD
hubs.
Keep track of expiry of limits, borrowing documents, insurance/Takaful policies,

etc. to ensure their timely renewal by the branches. One month before the expiry
date, branches should be reminded by the respective CAD hubs for timely action.
viii. To ensure completion of all formalities required in respect of borrower’s securities

and liabilities to be swapped from other banks by the branches.
ix. To ensure marking of our bank’s lien on deposits [Customer's / 3rd Party Accounts]
and instruments (Term Deposits Receipts, Government Securities- etc.) issued by our
own bank and/or by other banks. Saving Centers (for
x. To ensure that borrowers are submitting monthly Stocks & Receivable reports (in
case of Hypothecation charge over current assets). For pledged goods,
Mucaddams / borrowers are required to submit the Pledge Stock report on each
month end and / or as and when any movement in pledged goods takes place to
respective Unit.

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xi.
xi.
In case of Pari Passu / Ranking Charge, CAD to ensure that borrowers are submitting the
comprehensive Stock Position i.e. borrowing position at all concerned banks along-
with the overall stocks / Receivables position.
xii. Issuance of NOCs in favor of Other Financial Institutions for up-gradation &
Vacation of Charges.
xiii. To ensure maintenance of Limit as per Drawing Power positions against Hypo,
pledge of Shares and Commodities. Delivery orders for the release of shares and
commodities will also be issued by respective CAD Operations Unit.
xiv. Preparation of various MIS Reports for the consumption of Credit Monitoring /
Business / IBB & Credits.
CAD shall also be responsible for obtaining and compiling all management reports
pertaining to Credit functions of IBBs. All other MIS reports to be submitted to
respective Unit on periodical basis.
All CAD Hubs follow the standard procedure in timely manner and in case of any
deviation -reporting of deviations to upper Management of the Bank.
xv. To perform Operational Activities such as Feeding of Limits, Collateral Capturing,

Insurance /Takaful placements along with PPR in BAHL System, pertaining to IBBs.
xvi. No limit is being fed in the system without completion of all formalities by the
branches.
xvii. Arranging/Assigning of valuation reports of fixed assets.
xviii. Release of Securities as per Approved/Defined parameters
Important Note:
In Short, No funded or non-funded facilities would be instituted without issuance of a

Clean/ Conditional DAC/ Authorization of Limit by respective CAD Hub Islamic Banking.
11.2 Miscellaneous Tasks

Islamic Banking
i.
Scrutinize the documents or evidences submitted in compliance of customized
Process Flows.
ii. To review & arrange feedback for SBP, Internal & Shariah related audits that
occurred due to non-compliance.
iii. Maintenance & Reconciliation of Stamp Paper Management.
iv. To conduct periodic surprise visits with business groups for inspection of pledge
goods, as and when necessary.
Inspections of pledged stocks are regularly [30 - 45 Days /Quarterly] being

conducted by the designated staff of branches and CAD hubs Islamic. [Third party
independent inspection of the hypothecated / pledged stocks may be carried out in
consultation with the respective Area Office, where deemed necessary]
v. Safe Custody of Securities / Charge Documents in fire proof cabinets & maintenance
of Safe in Safe out [SISO] Registers.
vi. Limit maintenance as per Drawing power against pledge and hypothecated goods
on day to day basis.
vii. Appointment of Muccadam’s by CCAD Unit Insurance & Vendor Management.

However, CAD Hub Islamic unit work as a liaison between Business Unit &
respective Unit for necessary clearance & subsequently Issuance of Muccadam
Letters.
viii. Payment of bills of Valuators & Muccadams and recovery of stamp paper charges in
collaboration with IBB branches by debiting charges directly from the customers’
accounts.
ix. CAD hubs to report all approved and unapproved exceptions and following up on
their regularization within the allowed time frame.
11.3 General Guidelines
i. CAD officers will receive Approval via LONO from business groups / branches.
However, they will not accede to any advice from the customers directly.
ii. Customer’s signatures on all the correspondence/documents will invariably be

verified by business units / IBBs.
iii. All registers /MIS reports maintained by department will be subject to review by the
respective Team Leader.

Islamic Banking
iv. All CAD Hubs will maintain an updated list of approved Lawyers, Surveyors/
Evaluators, and Insurance companies to ensure that all the related tasks are being
performed by approved vendors.
v. Documentation Unit will ensure that stamp duty as applicable in their respective
province is paid on all the documents executed.
vi. The expiry dates of Insurance / Takaful policies of

pledged/Hypothecated/Mortgaged/Fixed Assets will be closely monitored and
send a notice prior to the expiry date should be served to the concerned BU for the
arrangement of its renewal.
vii. No DAC will be released by the Department unless securities/documentation

required for the credit facilities must be perfected before issuance of DAC. While
conditional DAC to be issued for the facilities where valid Deferrals/Waivers held.
Further too above, DM & Ijarah finance facilities where post compliance to be
observed Including Takaful Policies.
viii. CAD will maintain a detailed record of all the securities/documents held under its
custody entering the details of all such securities/documents to be captured in
BAHL system and to be recorded in Safe in Safe out (SISO) register.
ix. Security / charge documents pertaining to each individual customer will be kept in
a separate folder. The Department should ensure that the folder being used for the
documents is damp proof to avoid damage and dampness. The security folders
containing customers’ charge documents and securities will always be held in dual
control in a fireproof safe.
x. Each & every documents submitted to CAD Hub Islamic Banking by the BUs / IBBs
should be accompanied by a covering lodgment Memo & duly entered in DMA.
Further BUs/ IBBs will retain a copy of all documents at their end for disbursement
purpose.
Important Note:
All Islamic CAD Hubs to adopt uniform practices across the board under prevailing BAHL
guidelines / procedures which have been designed to put in place the necessary internal /
legal / regulatory/ Shariah requirements for compliance / perfection of security and
financing agreements before allowing / utilization of banking facilities to the customers.
12. CAD HUB ISLAMIC BANKING:

Islamic Banking
For smooth Process Flow of above mentioned activities in CAD Hub Islamic Banking, the
CAD functions are broadly bifurcated in Five (05) segments:
a. Documentation Unit
b. DAC Issuance Unit
c. Reporting / MIS Unit
d. Vault Management Unit
e. Limit Feeding Unit
DOCUMENTATION
UNIT
13. DOCUMENTATION UNIT:

Islamic Banking
There are Three [03] types of documents which include:
i. General Documents
ii. Financing / Transactional Agreements
iii. Security Specific Charge Documents
14. GENERAL DOCUMENTS:
Following documents are classified as part of General Documents and should be obtained
duly perfected as stated in the processes to follow hereunder:
i. Proprietorship Declaration Letter

ii. Deed Of Partnership (For Partnership Firms)
iii. Partnership Resolution (For Partnership Firms)
iv. Board Resolution (For Limited Companies)
v. Memorandum & Articles of Association of a Company
vi. Form A & 29 duly attested by SECP
vii. Bylaws / Trust Deed (For Trusts/Associations/Clubs Etc.)
viii. CTC of The Gazette of Pakistan with Registration Number
ix. Moradabad Authorization Certificate
x. Latest Search Report From SECP and No Objection Certificates (NOCs) (In Case Of
Limited Companies)
xi. LAF & BBFS (As per SBP Guidelines)
xii. Any Other Documents As Per Credit Approval
14.1 Financing / Transactional Documentation Parameters:
The following important Points with regard to documentation should always be considered:
14.2 Compliance to SBP Prudential Regulations & Shariah Guidelines
The compliance to SBP Prudential Regulations & Shariah Guidelines is extremely crucial as
any violation or circumvention of these regulations/guidelines shall render the Bank liable
for penalties under the Prudential Regulations, various circulars issued by SBP and the
Banking Companies Ordinance, 1962.
14.3 Adherence to SBP / Local Laws

Islamic Banking
All State Bank of Pakistan Prudential and other regulations related to documentation /
Local Laws for Stamp Act 1899 on documents / Shariah Governance Framework &
Parameters / Instruction in Bank’s circulars / Product manuals should be strictly followed.
14.4 Documentation request from the branch
Branches will request the CAD hubs (in writing via LONO) for the preparation of
Transactional / Financing & Security / Charge documents as per approved terms. CAD
hubs Islamic will prepare the required documents and will send the same to respective
branch for execution. After all the required information / documents are provided by the
branch as per provided Checklist, the documents should be prepared and sent to branch in
Two [02] working days. TAT will be started after completion of all requisite formalities.
14.5 Submission of copies of approvals by Credit Division
Credit Division will also send one copy of each approval (through LONO and/or via
Surface Mail) to each CAD hub Islamic for their advance information, checking and record.
From the copies of approvals received from the Credit Division, CAD hubs Islamic will
check through the system to verify that the approved facilities have not been allowed prior
to the completion of Documentation & Security arrangements.
14.6 Financing / Security Documentation Guidelines:
Following procedure shall be followed by the Branches and CAD Hubs Islamic for the
preparation and execution of transaction and charge documents:
i. Sec 17 of the Stamp Act 1899 requires that all documents chargeable with stamp duty
should be stamped before or at the time of execution of the documents.
Documentation Unit of respective CAD Hub will communicate stamp paper charges
to respective BU / IBB.
ii. Documentation Unit of respective CAD Hub forward the Charge / Security
documents along with preliminary Checklist of required documents as per approval
terms signed by Team Leader.
iii. It is the responsibility of CAD Hubs to obtain and review all Financing and security
documents [Fresh / Renewal /Enhancements / Restructuring / Earmarking / Staff]
for adequacy and correctness before delivery of documents.
iv. Documents should be on Bank's formats as approved by the Shariah Board & Legal
Counsel.

Islamic Banking
v.
v.
Format other than bank’s standard format should be vetted by Shariah Board, Bank's in
house Legal Counsel/lawyer on bank’s panel and or clearance of legal advisor
should be in place, however for any change in the standard terms and conditions of
Facility Offer letter & all other documents must be in conformity with approval of
competent authority, Legal & Shariah board vetting.
BUs / IBB / CAD Hubs Islamic to arrange legally drafts documents from Product
Development duly endorsed by Shariah Board along with legal clearance from in-
house Legal Affairs Division / legal advisor on bank’s approved panel of any such
document which is not on the bank’s standard format.
All the drafts / legal opinions will be arranged and any coordination for the same
will be made by BUs / IBB, whereas CAD will extend support to prepare the
documents with coordination of BUs / IBB. Upon receipt of clearance from all
departments the Documentation unit will get the drafts printed on the advised legal
papers.
vi. The documents of consortium / syndicate financing will be arranged though the in-
house legal affairs division / legal advisor on bank’s approved panel (approved
transaction lawyers.
vii. Document should always be filled in completely and no blanks should be left
unfilled. The amount should be written in full both in words and figures wherever
required.
viii. Name and designation of authorized signatories of the bank signing the documents
should be mentioned next to their signature.
14.7 Information / Documents Required by CAD Hub Islamic Banking
Documents required by CAD Hub Islamic Banking for the execution of documents
including:
i. Copy of formal approvals (AF - 1, AF - 2, AF - 3, AF - 4, HR Approvals for Staff

Cases)
ii. Borrower Basic Fact Sheet (BBFS), Loan Application Form [LAF] as per SBP
approved format (Properly signed by the authorized persons, as mentioned above)
iii. Declaration duly signed by the customers (As per prescribed formats for SME and
Corporate borrowers)
iv. Lien marking Reports required in order to ascertain account status over Lien to be
marked and in corporate the same in Letter of Lien & Set Off
Islamic Banking
Copy of Latest eCIB report.
v. In case of Cash security i.e. Copy of TDRs / FDRs etc.
vi. Copy of CNICs / Verysis of directors for the execution of PGs
Certificate (supported by the copy of the instruments, if any) duly signed by the
Credit Officer and the Branch Manager certifying that all the required liquid
securities are held by them. Complete particulars of liquid securities held by the
branch must be incorporated in the aforementioned certificate.
vii. In case the liquid securities are not yet provided by the customer, CAD will prepare
the documents on the basis of details provided by the branch BUT this certificate will
invariably be submitted, along-with the copies of instruments, to CAD before the
issuance of DAC. Copy of Stock Report showing the latest stock position of the
customer with all relevant details like commodities type and its locations etc.
viii. In case of limited Company, Latest Search report from SECP records, NOCs and
Letter of Awareness from banks and Financial Institutions whose charges over
borrower’s assets are appearing in SECP records. These letters are also required in
case the borrower is a Sole Proprietorship or a Partnership concern and also banking
with other banks (on hypothecation terms) and / or mortgaged its assets (must in
case goods are being pledged on the same property) to them as a security.
ix. In case of 3rd party rented god-own proper address & location required for the
execution of Letter of Access & Disclaimer and valid Rental Agreement.
x. Branches will submit photocopies of complete chain of property documents to

respective CAD hubs which will liaise with the Legal Division / Legal Consultants
for Pre-Mortgage legal opinion. Further documents, as per legal opinion, shall be
arranged by the BU / IBB from the borrower.
xi. After CAD is satisfied that all documents required for the creation of effective
mortgage [TRM / EM] have been obtained / completed, they will prepare the
Charge and / or Transaction Documents and forward them to the branches for
execution by the customers.
xii. CAD Hubs Islamic will prepare MOTDs only when all requisite documents as per
Legal Opinion provided by BU / IBB. No "Kacchi / Raw MOTD" to be prepared in
the absence of pre-requisite documents.
xiii. CAD will be responsible to ensure completion of the following Charges, as

applicable, on the mortgaged properties.
xiv. Copy of Search Report from SECP (in case of Limited Companies).

Islamic Banking
xv.
xv.
Registration of Charge with SECP (only in case property belongs to Limited Company)
xvi. Creation of Registered Mortgage (Token or full, as per approval) in favour of the
bank. Registration of IGPA (if required as per terms of approval).
xvii. In case the property is already mortgaged to some other bank and our bank’s charge
is being added, Holding Letter, NOC from that bank along-with the attested copies
of complete chain of documents will be required.
xviii. Upon completion of all legal formalities, CAD shall obtain Post-Mortgage legal
opinion from our Legal Consultants and forward it to the branches. DAC will be
issued upon the receipt of satisfactory Post Mortgage Legal opinion. In case
disbursement is required prior to the completion of entire mortgage formalities,
approval from the competent authority(s) will be required
xix. Branches are required to forward the copy of the Financial Guarantee received or the
proposed draft duly vetted by Shariah & Legal Division.
xx. Branches are required to forward the Pledge of Shares report as extracted from CDC
containing details of Pledge Inventory.
xxi. Upon receipt of the above mentioned Original / Photocopies of the documents, CAD
shall prepare the Charge / Transaction Documents together with Facility Offer
Letter and forward them to the respective IBB/BUs for execution by the customers.
xxii. Needless to emphasize that credit facilities shall only be disbursed / Feeding of
Limits into the customers account as per terms and conditions of the approved
facilities and after the completion of all the required formalities.
xxiii. Any other document which may be necessary or required by the CAD according to
the revised terms and conditions.
Important Note:
Requisition of all other documents as per Standard Checklist as provided by CAD Hub
Islamic to respective BUs/ IBBs.

Islamic Banking
15. FINANCING / TRANSACTIONAL AGREEMENTS:
Presently, BAHL offering following Product Mix of Islamic Banking facilities and there-
against following standard Financing /Transactional Agreements are being obtained which
includes:
15.1 Types of Credit Facilities
The Bank offers a comprehensive set of credit facilities to cater to the financing requirements
of its Corporate, Commercial, SME and Consumer Finance customers. The below lists the
basic product offerings on which credit facilities to a customer may be based on. This is not
an exhaustive list and is meant to serve as a guideline rather than be a comprehensive
product menu.
As the bank continues to evolve and adapt to market conditions, new products will be
identified and added to this product suite. New products may be added and will be
annexed in this policy after approval from the Shariah Advisor. These products may be
approved by the BOD on a case to case basis.
Following Corporate / Commercial / ME / SE asset products will be used in BAHL’s

Islamic Banking. This list is neither exhaustive nor final and shall be modified as and when
a new mode and instrument is introduced after approval from the Shariah Board of Bank.
All products will follow the Bank’s standard discipline of review prior to launch i.e. Shariah
and Compliance review. Each product will be supported by a product paper that will detail
the risks arising at different contract stages, and mitigating factors.
Facility Offer Letter:
Murabaha Finance Facility:
a. Master Murabaha Facility Agreement

b. Master Agency Agreement
c. Global Agency Agreement [Subject to RSBM & IB - Head Approval for a specific
Amount & Tenor]
d. Demand Promissory Note
Letter of Credit Facility Under Murabaha Arrangement:
a. Master Murabaha Facility Agreement

b. Master Agency Agreement
c. Undertaking Regarding LC
Letter of Credit Facility Under Wakalah Arrangement (Subject to Approval):
Islamic Banking
a. Facility Offer Letter
Ijarah / Lease Finance Facility For Machinery & Equipment:
a. Ijarah Application Form

b. Ijarah / Lease Facility Agreement
c. Letter of Agency
d. Undertaking to Purchase Ijarah Assets
e. Demand Promissory Note
Ijarah / Lease Finance Facility for Multiple Vehicles:
a. Master Ijarah / Lease Facility for Vehicles

b. Master Letter of Agency
c. Undertaking to Purchase Ijarah Asset
e. Sale Agreement [Under SLB Arrangement]
f. Undertaking for Afghan Trade & NATO [For CVLD Cases under DM & Ijarah]
Diminishing Musharaka Finance Facility for Assets: [Under Shirkat-ul-Milk]
a. Master Diminishing Musharaka Agreement for Assets

b. Master Agreement for purchase Musharaka Assets
c. Master Rental Agreement
e. Agreement to Create Mortgage [For Interim Period Coverage]
f. Undertaking for Compliance of Mortgage Formalities
g. Letter of Continuity
h. Sale Agreement [Under SLB Arrangement]
Musawama Finance Facility:
a. Master Musawama Facility Agreement

b. Master Agency Agreement for Sale of Goods
c. Trust Deed
d. Indemnity
e. Demand Promissory Note
Istisna Finance Facility: [Future Sale]

a. Master Istisna Agreement
b. Master Agency Agreement for Sale of Goods
c. Master Corporate Guarantee
Running Musharaka Facility: [Under Shirkat-ul-Aqd]
a. Running Musharaka Agreement

Islamic Banking
b. Demand Promissory Note
Islamic Long Term Finance Facility [ILTFF]:
a. Master Mudarabaha Agreement [Between BAHL & SBP]

b. Master Diminishing Musharaka Agreement for Assets
c. Letter of Agency
d. Master Agreement for Purchase of Musharaka Assets
e. Master Rental Agreement
f. Demand Promissory Note
g. Irrevocable Debit Authority
h. Letter of Continuity
i. Undertaking regarding Utilization Funds under ILTFF Scheme [By COD]
Letter of Guarantee [Kafalah]:
a. Counter Guarantee
b. Demand Promissory Note
Important Note:
Requisition of other documents subject to product nature as approved by Shariah Board

time to time.
15.2 Facility Offer Letter (FOL)
Offer letter prepared by CAD Hub Islamic Banking, jointly signed by Business and
respective CAD [having P.A. number) Unit and duly accepted by the customer’s authorised
signatories as per authorizing document(s) should be in place.
At times the client does not accept certain terms & conditions of Bank's standard FOL, and
make cuttings on the irrelevant / unacceptable clauses. Therefore, accepting or rejecting
such cuttings subject to approval of CCC and the in light of legal opinion, if required.
Moreover, such cuttings should be approved by the Shariah Advisor.
Similarly, deletion of regulatory and security monitoring related clauses, approval from
Legal / Shariah / Credit Division should also be sought.
Offer letter / Short Offer Letter for offering fresh facilities, renewal, extension, pricing,
enhancement, or any material amendments in the facilities’ terms should be obtained before
issuance of DAC / institution of limits.
For Swinging / Hybrid limits where the facilities are interchangeable and one facility is a
sublimit of other customer's facility, the Facility Offer Letter must be signed off by all
concerns.
Islamic Banking
15.3 Master Murabaha Facility Agreement (MMFA)
This agreement is used for revolving funded Murabaha facility in Local [PKR], Under IERS,
FCY [FE-25] for import/export and Usance Bill Murabaha and against Sight Letters of
Credit which are retired by the customer from its own sources, to facilitate customers to
acquire local and imported goods/assets..
In very rare cases Usance Letters of Credits are also established under MMFA, process
whereof should be specifically approved by CCC.
"All other terms & Conditions of Murabaha Manual to remain intact at all times for
necessary compliance"
15.4 Agency Arrangements
Normally, banks do not have matching expertise of selling the goods and negotiating an
efficient price, the Bank can sell the goods under agency arrangements through the same
seller after taking delivery of goods. It is not permitted for the buyer to sell the goods i.e.
subject matter of Murabaha, Istisna, Musawama before taking possession
(Physical/Constructive) of it. It should be strictly noted that in all above possibilities, the
goods cannot be sold to the same seller or its other owned company/firm, with common
shareholding of 33% or more, Buy-back arrangements- as the Buy-back arrangements take
the form of ”Bai-inah‟ which is prohibited in Shariah.
The bank, in case of excessive profits may give certain or whole portion of its profit (net-off
its expense’s and desired return on its investment) to the agent as Hibba. Decision of Hibba
is at the sole discretion of the bank and customer in the capacity of agent cannot demand for
the same.
“Agency Agreement is valid for a period of 01 year against Working Capital Line"
15.5 Sight Letter of Credit Facility Under Murabaha Arrangement
This facility is for customer to import raw material & assets as bank's agent from the
foreign seller and its purchase from the Bank on Murabaha either on deferred or on
spot basis. The bank can also include the profit for PAD period in case of Sight LC
by incorporating the same in Murabaha price.
Letter of Credit facility when opened under the ambit embed of Murabaha Finance then
Master Murabaha Financing Agreement will be obtained although LC facility will be retire
through customer's own resources.

Islamic Banking
All LCs amount where exceeded due to Exchange Rate fluctuation must also be approved
by competent authority and duly covered through Master Murabaha Financing Agreement.
15.6 LC without MMFA (Sight / Usance0)
LC facility without MMFA is allowed for the import of raw material / asset in customer's
own name. In this case the assets are possessed by the customer and bank is only providing
services to the customer and no Murabaha can be done and no profit can be taken.
In case of Sight LC, an exception/specific approval from management shall be obtained

because no profit can be recovered from the client in case of delay or PAD or any other
reason. However, a delayed payment penalty can be charged to customer shall be credited
to ‘Charity Account’ maintained by the Bank.
Under Wakalah arrangement approval required from CCC & Shariah Board.
15.7 Ijarah / Lease Facility Agreement for Plant & Machinery
This agreement is used to facilitate financing of plant, machinery and equipment to the
customer on the basis of Operating Lease having exclusive ownership of the Leased Asset
with BAHL. This agreement is used to save the extra expense of the customer related to
stamp duty charges incurred on the legal documentation in Lease transactions where a
series of assets are to be financed from time to time under the set of sub-lease agreements.
15.8 Master Ijarah / Lease Facility Agreement for Vehicles
This agreement is used to facilitate financing of multiple vehicles [Commercial, Non

Commercial, Brand New, Used] under a single approved Limit as per approval to the
customer on the basis of Operating Lease [Direct Ijarah] having exclusive ownership of the
Leased Vehicle with BAHL. This agreement is used where a series of vehicles are to be
financed from time to time under a single Master agreement.
All Financed Assets must be in the name of BAHL - IB and duly registered with Excise &
Taxation under HPA marking in favor of Bank. CAD Operation will recover Security
Deposit upfront from customer's account as per approval terms and conditions.
"Under The Companies Act, 2017 Charge Registration over Ijarah Assets not yet finalized.
However, guidelines for the same will be issued / finalized in due course after getting
IBD, Legal & Shariah Consults"
15.9 Master Diminishing Musharaka Agreement for Assets

Islamic Banking
This agreement is used to facilitate financing of Plant, Machinery, Equipment, Vehicles as
well as Property to the Customer on the basis of “Shirkat ul Milk” (joint ownership with the
Customer). As with the Lease Facility Agreement, the purpose of this agreement is to
facilitate the Customer in saving extra cost related to stamp duty charges incurred on the
legal documentation in Diminishing Musharaka Transactions where a series of assets are to
be financed from time to time.-Equity Participation (____%) must be clearly specified in the
approvals. The share of the financier is divided into a number of units. The customer
purchases these units periodically until the customer becomes the sole owner of the
property/asset
15.10 Master Musawama Agreement

In Islamic Banking this facility is widely used for transactions where it is difficult
to determine the cost of goods/commodities which are subject matter of
Musawamah Sale.
This is also a revolving facility offered against PKR, FE-25 (foreign currency import/export)
and IERS mode of financing to customers.
This agreement is used to facilitate customers in transactions wherein price of the

commodity to be traded is stipulated without any reference to cost or profit incurred by the
seller. Thus it is different from Murabaha in respect of pricing formula. Further, the Credit
lines
15.11 Master Istisna Agreement
This agreement is used to facilitate customers in transactions where manufacturing or

construction is involved. This is also a revolving facility offered against PKR, FE-25 (foreign
currency import/export) and IERS mode of financing to customers to finance their overhead
expenses. The manufacturer also acts as BAHL undisclosed independent agent to sell the
same goods to the Credible Buyers in the market once they are ready for sale. A Corporate
Guarantee is provided by the customer guaranteeing the credit worthiness of such Buyers
and undertakes to compensate BAHL - IB incase of failure by them to pay the sale price to
BAHL’s Agent.
15.12 Running Musharaka Agreement
This facility is also offered on revolving basis whereby BAHL and the customer enter into
Musharaka based on Shirkat-ul-Aqd wherein BAHL and the customer invests in the
identified primary Operating activities of the customer’s business and participate in the
profits/(loss) generated by the Musharaka in proportion to their respective Investment
ratio.

Islamic Banking
15.13 Islamic Long Term Finance Facility [ILTFF]
This Long Term facility is offered in LCY finance for the import and locally manufactured
new Plant & Machinery for eligible export oriented projects for the period of 10 Years
including 02 years Grace Period. This facility shall be available to the export oriented
projects having annual export is at least USD 5 Million.
15.14 Sale and Lease Back (SLB Under Ijarah & DM)
As a market norm in conventional banking, Sale and Buyback transaction are often executed
for the purpose of creation of liquidity therefore under normal circumstances such
transactions are discouraged in Islamic Banking. However, with a prior approval from its
Shariah Board bank may enter into sale and buyback, transaction with its customer for a
specific property / asset which is already owned/ by the customer in its own name.
For the subject purpose, market value of the asset is ascertained and share of Banks
participation in the subject asset is determined or vice versa arrange Deferral / Waiver from
the competent authority in case of non availability.
Out of the total agreed value of the DM Asset, the bank will directly pay-off the customer to
the extent of its (bank’s) participation only. The process mentioned above will be followed
for SLB transaction except that units will not be sold during the First year or vice versa .
Only Profit will be recovered on specified period, while sale of Unit will be allowed to sell
after one year or vice versa.
Important Note:
"All other terms and conditions of AAOIFIS & IFAS I & II standards / guidelines to
remain intact as endorsed by SBP & SECP respectively"
16. CALCULATION OF PRICING:
In the absence of Separate Islamic Banking pricing mechanism, CAD Hubs Islamic Banking
will use appended standardized rates for different pricing
i. For Short Term / Working Capital facilities on KIBOR / LIBOR rate basis;
ii. For Long term facilities on KIBOR rate basis including Floor & Cap [Any waiver of
Floor & Cap subject to Shariah Board Approval]
17. SECURITY SPECIFIC CHARGE DOCUMENTS:

Islamic Banking
While preparing Charge & Security documents for various funded & non-funded facilities
as approved by competent authority(ies), following guidelines to be complied.
17.1 Types of Securities
The process of securitization refers to ensuring that assets of the borrower are legally
encumbered in favor of Bank through registering the same with respective legal authorities,
seeking Hypo / Pledge of asset, documentation being signed by the borrowers duly
witnessed & signature verified and /or marking of lien on deposits. The process in its
entirety must guarantee the Bank an absolute priority right to repayment when asset is sold.
i. Margin
ii. Lien
iii. Security Deposit
iv. Registration of Charges under Hypothecation over Current & Fixed Assets
v. Property as Collateral
vi. Pledge of Stocks & over Shares
vii. Guarantees
Following is the list of acceptable securities by the bank:
i. Margin on Account
ii. Lien on Deposit [On Account & on TDRs]
iii. Hypothecation of charge on Current &, Fixed Assets
iv. Equitable / Registered Mortgage over Land and Building
v. Pledge of goods
vi. Pledge of Shares (As per Shariah Approved List, registered with CDC)
vii. Personal Guarantee, Cross Company Guarantee, Counter Guarantees
viii. Assignment over Bank Guarantee [Subject to Shariah Approval]
ix. Title of leased assets
x. Ijarah / Lease Key Money under Security Deposit
xi. Assignment of Receivables
xii. Subordination Loan
xiii. Any other security approved by the competent authority
The Bank, as per SBP Prudential Regulation can finance on a Clean bases upto a certain
limit. Any amount exceeding such a limit, will be fully Secured against tangible Security as
far as possible with most liquid security. Security is meant to be an insurance against an
emergency in case the advance fails to perform. Therefore to ensure their enforceability, the

Islamic Banking
documents must be properly completed, signed, stamped, witnessed and registered where
ever required as per requirement.
During the course of its business, different types of securities are received to minimize or
cover the risk of non-payment. As such the objective in demanding security is to ensure
repayment of the finance. The Documentation & Review Unit of respective CAD Hub to
ensure that all the required documents are obtained and to ensure correctness /
completeness of the documents in line with the bank’s policy, before issuance of DAC.
The following important Points with regard to Security documentation should always be
considered:
17.2 Margins
Bank shall maintain margins in respect of each security as per Bank’s Policy. It is to be
ensured at all times that the margins are not lower than the margins prescribed by the
Regulator from time to time.
SECURITY TYPE MARGIN REQUIREMENT AS PER POLICY

Pledge of shares 30% of market value (or as per SBP /Bank's
Policy)
Hypothecation over Stocks & Receivables 25%
Mortgage of Land & Building 40%
Hypothecation over Plant & Machinery 40%
Pledge of Stocks 10% or as approved by the CCC on case to case
basis.
Lien over Deposits Minimum 10% or as per Approval
Margin Nil or as per SBP requirement
Note:
i. As per Approval, applicable Margins must be taken care @ the time of execution of
Security documents. However, relaxation in margin requirement shall be allowed in
justifiable cases on case to case basis by the competent authority.
ii. Equity Participation must be specified in the provided Approvals for DM related
cases.
iii. Requisition of Cash Margins to be ensured by BU/IBB/Trade Finance Department.
17.3 Lien on Accounts / Deposit / TDRs

Islamic Banking
Refers to the banker’s right to retain the property until claim is paid under Section 172 of the
Contract Act, 1872.
i. The possession of the instruments has been obtained lawfully as a banker.

ii. The property is in the hands of the banker in the capacity of customer’s banker.
iii. Only those documents and properties can become subject to banker’s lien which
came under banker’s control in the normal course of its banking business.
It is varied on various accounts / deposits of the customer or third party owned being
maintained with BAHL or any other bank. In order to create perfect lien following
documents on bank standard format should be obtained.
i. Letter of lien & set off

ii. Request for marking of lien
iii. Account blocking evidence (screenshot / system printout) duly signed by two
branch authorized signatories (having P.A. number) showing amount being blocked
to be obtained from the respective IBB.
iv. The maturity of TDRs should be valid, date, amount, name of beneficiary must be
correctly mentioned.
v. TDR should be properly lien marked on its face by two bank/branch authorized
signatories mentioning their P.A numbers in it.
vi. TDR should be properly discharged on its back by beneficiary (by signing dually)
and to be signatures verified by the bank/branch authorized signatory.
Important Note:
"Under Section 100 of The Companies Act, 2017 Charge over TDR & Shares in the name
of Company to be registered with SECP with in 30 Days"
17.4 Pledge of Shares
In order to create perfect lien / pledge following documents on bank standard format
should be obtained.
i. Letter of Pledge, Lien and Authority For Shares and Securities

ii. Shariah Approved List of Shares
iii. Details of Shares, name of beneficiary, quantity etc. must be obtained
iv. Shares must be registered in CDC. Latest CDC activity report to be obtained
v. The bank’s circulars and SBP guidelines issued time to time in this regard to be
complied with meticulously.
17.5 Pledge of Goods

Islamic Banking
Section 172 of the Contract Act, 1872, defines a pledge as “the bailment of goods as security
for the payment of a debt or performance of a promise is called pledge”. The person
delivering the goods is called Pledgor and the person taking possession is called Pledgee. A
Pledgee has the exclusive possession of the property until the advice is repaid in full while
in case of default the pledgee has the power to sale after giving due notice. In the form of
pledge, goods remain in the possession of pledgee (bank), hence it is responsibility of the
banker to hold the goods in its proper control, deliver the same to customer when the
finance is repaid or effect sale after completing necessary formalities.
In order to create perfect pledge following documents on bank standard format should be
obtained.
i. Letter of pledge along with Form X duly registered with SECP in case of Ltd
Companies
ii. Letter of Access & Disclaimer from owner of premises, rent agreement [in case of 3rd
party premises]
iii. In case the pledge of goods being the security all other necessary requirements i.e.
Pledge Site Approval, Appointment of Macadam, obtaining of Stock reports, Stocks
inspection, Takaful / insurance policy, Monitoring of Drawing Power or any other
pledge related document as per bank’s policy / approval to be obtained and the
perfection of these documents is the responsibility of BUs/IBB/CAD Operations.
17.6 Hypothecation charge on Fixed Assets and Current Assets
Hypothecation is defined as “a legal transaction whereby goods may be made available as

security for a debt without transfer of either the property or the possession to the lender”.
The essence of hypothecation is that neither the property in goods nor their possession
posses to the lender but the security is granted by means of a Letter of Hypothecation which
usually provides a banker’s charge on the hypothecated goods. When the property in goods
is charged as security for any finance but the possession is left with the customer, the goods
are said to be hypothecated.
In order to create perfect charge over the hypothecated goods following documents on bank
standard format should be obtained.
i. Letter of Hypothecation [As per Nature of Security Arrangements]

ii. Letter of Hypothecation of Specific Fixed Assets: Only where hypothecation charge
is created over specific fixed assets.
iii. In case creating / amendment of charge on company’s assets registered with
Registrar of Joint Stock Companies following documents to be obtained and business
groups to arrange the same through outsource vendor:

Islamic Banking
17.6.1 Fresh charge
i. Form-10 to create a new charge containing all details of charge to be registered,

description of security, location amount of charge etc. (In case security owned by
third party, the name of third party to be mentioned along with the customer’s
name in relevant columns) & Affidavit.
ii. Letter of Hypothecation (Consolidated): Schedule of assets to be amended
accordingly. Other than hypothecation charge over specific fixed assets.
iii. Search report (before charge) to verify the encumbrance on the assets of other banks.
iv. Search report (after charge) to verify the creation/ranking of BAHL’s charge.
17.6.2 Amendment in charge
i. Form –XVI for amendment in existing charge containing all details of charge to be
registered, description of security, location amount of charge etc. (In case security
owned by third party, the name of third party to be mentioned along with the
customer’s name in relevant columns) & Affidavit.
ii. Supplemental Letter of Hypothecation / Pledge, enlighten details of amendment.
iii. Search report (before charge) to verify the encumbrance on the assets of other banks.
iv. In case of up-gradation of charge NOCs from all prior charge holders / lenders.
v. Search report (after charge) to verify the creation/ranking of BAHL’s charge.
17.6.3 Other Guidelines
i. For entities other than limited companies only LOH to be obtained.

ii. In case of charge over plant machinery, valuation of asset to be obtained.
iii. In case of charge over current assets, stock & receivable reports to be obtained.
iv. Periodic assets inspection report to be obtained as per bank’s policy.
v. The business groups to ensure that assets under charge of the bank must be insured
and insurance policies are delivered to CAD Hub for review, record & safe custody.
17.7 Equitable / Registered Mortgage of Land and Building
Mortgage is defined in Section 58 of the Transfer of Property Act, 1882 as “the transfer of an
interest in the specific immovable property for the purpose of securing payment of money
advanced or to be advanced or the performance of any promise which may give rise to a
pecuniary liability”. Mortgage therefore creates a transfer of an interest in an immovable
property. The transferor is called mortgagor and the transferee is called mortgagee. The
deed executed create a mortgage is called “Mortgage Deed”.

Islamic Banking
17.7.1 Types of mortgage
i. “Equitable Mortgage”: EM of the immovable property by depositing title deeds

with the bank.
ii. “Registered Mortgage”: RM by getting the mortgage deed registered with Registrar
of respective land Authority.
In order to create perfect charge over the land and building following documents on bank
standard format should be obtained including Original Property documents as per Legal
Opinion along-with Permission To Mortgage [PTM].
i. Memorandum of Deposit of Title Deeds (MDOTD)

ii. Token / Registered Mortgage Deed (where applicable)
iii. Personal Guarantee of Mortgagors (or as per approval terms & Conditions)
iv. Pre / Post / Clear In House Legal Opinion / Approved External Lawyer
v. Valuation report of Property / Fixed Assets
vi. Takaful / Insurance policy along with PPR
17.7.2 Constructive Charge
i. Memorandum Confirming Constructive Deposit of Title Deeds

ii. Letter of Comfort / Holding Letter: To be obtained from custodian bank prior to
execution of Constructive MOTD along with list of property documents (Only CTC)
held by custodian bank.
In case creating / amendment of charge on company’s assets registered with Registrar of

Joint Stock Companies following documents to be obtained and business groups to arrange
the same through outsource vendor:
17.7.3 Creating of Charge
i. Form-10 to create a new charge containing all details of charge to be registered,

description of security / property, location amount of charge etc. (In case security
owned by third party, the name of third party to be mentioned along with the
customer’s name in relevant columns) & Affidavit
ii. Search report (before charge) to verify the encumbrance on the assets of other banks.
iii. Search report (after charge) to verify the creation/ranking of our charge.

Islamic Banking
17.7.4 Amendment in charge
i. Form-16 for amendment in existing charge containing all details of charge to be

registered, description of security / property, location amount of charge etc. (In case
security owned by third party, the name of third party to be mentioned along with
the customer’s name in relevant columns) & Affidavit.
ii. Search report (before charge) to verify the encumbrance on the assets of other banks.
iii. In case of up-gradation of charge NOCs from all prior charge holders / lenders.
iv. Search report (after charge) to verify the creation/ranking of our charge.
17. 8 Bank Guarantees
Bank Guarantee is an irrevocable undertaking of a bank (guarantor) to effect payment

against presentation of a written statement of the guarantee holder (beneficiary) if a
contractually agreed obligation has not been fulfilled by the customer (applicant).
While executing a guarantee, the terms/ conditions of the guarantee should be closely
examined in order to determine the extent of Bank's obligation and/ or financial liability.
Prior to the issuance of a guarantee, the text should be examined and approved by Bank's
internal/external legal counsel & duly vetted by Shariah Board.
17.8.1 Types of Guarantees Available
a. Advance Payment Guarantees / Mobilization Guarantee

b. Bid Bonds / Tender Deposit Guarantee
c. Performance Guarantee
d. Standby Letter of Credit
e. Continuing / Open-ended Guarantees
f. Guarantees for Payment of Dues / Court Guarantees Shipping Guarantee
g. Guarantees denominated in FCY (Subject to SBP Approval and in compliance with
Regulatory Exchange Control guidelines)
All other terms and conditions of LG Manual to remain intact at all times .
17.9 Personal / Corporate / Counter / Financial Guarantees:
17.9.1 Regulation SME R-3: Personal Guarantee
All facilities, except those secured against liquid assets, shall be backed by personal
guarantees of the owners of SMEs. In case of limited companies, guarantees of sponsor
directors shall be obtained subject to approval

Islamic Banking
17.9.2 Personal guarantee
Personal Guarantee is an agreement that makes one liable for a third party's debts or
obligations. A personal guarantee signifies that the lender can lay claim to the guarantor's
assets in case the borrower defaults.
In order to create Security perfection following documents on bank standard format should
be obtained.
i. Personal Guarantee on bank's approved Format.

ii. Certified copy Of CNIC of guarantors along with Verisys should be obtained.
iii. In the absence of signature specimen card, signature of personal guarantors should
be verified from their CNIC.
iv. Fresh personal guarantees as above with every renewal-/restructuring/rescheduling
of facilities should be obtained.
17.9.3 Corporate Guarantee
Corporate Guarantee is a guarantee in which a corporate agrees to fulfill the financial

obligations of a debtor to a lender in the event that the debtor fails to fulfill the terms of his
financial obligations. Corporate guarantee can be provided by limited company to secure
the financial obligations of third parties. Public limited companies can provide corporate
guarantee to secure the financial obligations its subsidiaries/other third parties except
companies where both the companies have common directors (Section 195 of Companies
Ordinance 1984). Sole proprietorship and partnership firms cannot provide a corporate
guarantee to secure the financial obligations of a third party.
i. There should be a provision in the memorandum and articles of association of the

limited company for guaranteeing financial obligations of a third party.
ii. Board Resolution for provision of corporate guarantee and specifying authorised
signatories should be obtained from the corporate guarantor.
iii. Fresh corporate guarantees as above with every
renewal-/restructuring/rescheduling of facilities should be obtained.
iv. In case of Partnerships, copy of Partnership Deed should be studied to ensure that
no bar has been placed on giving or accepting this kind of security. However,
specific letter from partners in this regard is desirable.
17.9.4 Counter Guarantee
Counter guarantee where required duly executed by the Customer under Corporate,
Commercial, SME entities subject to approval]. Counter Guarantee on bank's approved
format must be obtained duly signed and stamp by the company.

Islamic Banking
17.9.5 Financial Guarantee
The financial guarantee is a contract that requires the guarantor to make specified payments
to reimburse the beneficiary for a loss it incurs in case the applicant fails to make payment
when due in accordance with the original or modified terms of financing agreements.
The financial guarantee can be of a local or foreign bank, there is no standard draft of
financial guarantee, therefore, before accepting the text/extension/amendment of the
guarantee should be approved by the Shariah and Legal Division.
i. The genuineness of the guarantee should be confirmed from the Head Office of the
issuing banks/financial institution.
ii. Guarantee of foreign bank/financial institutions should be received through
authenticated swift message or any other parameter as per approval terms and
conditions.
iii. The BAHL’s transaction should mature one month prior to the expiry of the
guarantee.
iv. The process as mentioned under serial a) to e) above should be followed while
accepting any amendment to the financial guarantee.
17.9.6 Draft of Guarantee
a) The financial guarantee should be irrevocable and unconditional (or with the conditions
which are acceptable to the bank). Branches should always refer the draft of guarantee to
our Legal Division & Shariah Board for their vetting, preferably prior to submitting the case
for formal approval.
b) Financing against financial guarantees issued by banks, both local and foreign, shall be
allowed only after the review and approval of the instrument’s text / proposed draft by the
respective Credit Committees, Shariah Board and clearance by International Division.
17.9.7 Financial guarantees in Foreign Currency
In case of currency mismatch i.e. exposure in local currency against the financial guarantee
in foreign currency, special care is required to keep a watch on the exchange rate
movements. To cover this risk, sufficient margin (at-least 10% or as per formal approval)
should always be kept in the guarantee amount at all times. Regulator Approval for the
issuance of Guarantee in Foreign Currency must be in place before issuance of DAC &
Limit.

Islamic Banking
17.9.8 Authentication of Financial Guarantee
The financial guarantee should be received by our bank through authenticated SWIFT
message. However, in case of local banks, exception may be allowed subject to the proper
verification of signatures on the guarantee instrument and also its authentication from the
issuing bank’s Regional / head office.
17.10 Title of Lease Assets & Security Deposit
Under Ijarah & DM title of the Assets must be in the name of Bank under HPA arrangement
duly registered with Excise in Taxation Department. Whereas under Ijarah Security Deposit
must be obtained as per approval terms and conditions.
17.11 Direct Lease Financing
i. Modus Operandi for disbursement of Ijarah Finance should be strictly in accordance

with Approval / bank's policy
ii. Physical inspection report along-with photographs of leased asset.
iii. Original registration file(s) of leased vehicle (i.e. Original Reg. Books, Original Sales
Invoices & Sales Certificates, Form 'F' etc.). CAD Hub IB will ensure the same for
CVLD Cases only under Ijarah & Diminishing Musharaka whereas for all other cases
CBD will pursue the same under the Centralization of Islamic Auto Finance Policy.
iv. Duplicate keys of leased vehicle(s).
v. Original comprehensive insurance policy with Premium Payment Receipts (upto
leased amount) for leased assets under CVLD /SLB & Machinery Cases only.
vi. Various necessary fields of leased charge documents to be filled by CAD Operations
in consultation with BU / IBBs
Important Note:
"All other terms and conditions of CVLD related cases to remain intact as per Bank's
Conventional Policy. However, CVLD Policy of IB is in process and will be shared in due
course by the respective Management”.
17.12 Assignment over Receivables
Approved instrument i.e. Deed of Assignment over Receivables must be executed in

between Bank called Assignee and the customer called Assignor. Whereas requisite
annexure i.e. Notice of Assignment and Confirmation from the debtor must also be singed
by the Obligator whose receivables assigned to the Assignor.
In case of Limited Company Charge over Assignment must be registered with SECP in
favor of Bank.

Islamic Banking
17.13 Sub-Ordination Agreement
This document is obtained where the bank has taken into account the loans of directors,
shareholders and associate companies etc. for the benefit of debt to equity ratio/other
regulatory purposes. In such cases, the bank gets such loans subordinated to the bank’s
outstanding facilities by way of Sub-Ordination Agreement.
Business shall confirm the requirement of subordination agreement to CAD Hubs duly
endorsed by Approval Authority.
The requirement of subordination agreement should be mentioned in the FOL (requirement

of Prudential Regulations).
17.14 Other Guidelines
i. In case the property is owned by a third party limited company, relevant clauses
should be available in Memorandum and Article of Association and proper third
party Board Resolution to be obtained.
ii. Permission to Mortgage in favor of BAHL - Islamic Banking
iii. Sale Deed / Conveyance Deed
iv. Indenture of Lease
v. Encumbrance to be recorded in the record of concerned land owning authority.
vi. Marking of Lien over Property over exposure has been taken.
vii. Approved Building Plan / Aks-e-Shajra
viii. Search Certificates
ix. Completion Certificate of the Building
x. Mutation / Inteqal-e-Rahn in favor of Mortgagor
xi. Fard-e-Jamabandi
xii. Register Dakhil Kharij
xiii. Deh Jo Form
xiv. No objection Certificate from respective Land Authority
xv. Latest Paid Tax Challan (where applicable)
xvi. Pass Book [For Agricultural Land]
xvii. Pre / Post Legal opinion to be obtained and all the required formalities /
documentation to be completed as per the legal opinion.
xviii. Legal Mortgage Deed to be arranged by branches / business groups through legal
advisor on bank’s approved panel.

Islamic Banking
DAC ISSUANCE
UNIT

Islamic Banking
18. DAC ISSUANCE UNIT:
Review of Financing & Security documents is one of the fundamental roles of CAD
functions wherein DAC / Review unit exercises necessary due diligence and performs this
task with utmost care so that each approval condition should be complied and to carry out
all necessary documentation formalities appropriately consisting of various document in
accordance with the bank’s internal policy and compliant with regulatory requirements.
This activity minimizes risk at bank’s end by properly reviewing the securities /
documentation so that whenever bank needs to take any action against default / write off
case in the court of law, it may be able to do it properly on the basis of strong documentary
proof.
Therefore, DAC units of respective CAD Hubs to ensure the comprehensive review of
Financing & Security documents in line with the approved AFs. All the approved Securities
as defined in the Manual to be adhered to, however following is the main Process Flow and
major documentation requirements of some prime securities require to be undertaken and
to ensure the same before issuance of DAC. However, CAD Hub Islamic must ensure that
validity of the documents must matches with the expiry date of Approvals.
18.1 Scrutiny / Review Parameters
The process of scrutiny / review of documentation involves:-
i. All the documents are in conformity and in compliance of Regulator Guidelines,

BAHL Policies and in accordance with Shariah parameters.
ii. Review should not only be confined by counting of the documents held, but should
also include an examination of contents/clauses/signature etc. to ensure that the
documents are legally correct and affords the expected protection (to the bank).
iii. BUs / IBBs is responsible for arranging execution of documents from the customer
as per provided IOM and preliminary checklist earlier furnished by Documentation
unit
iv. BUs / IBBs must ensure that all pages of the documents should be signed / stamped
by the borrower(s) / executants(s) before submission in order to avoid any dispute
later on.
v. BUs / IBBs to ensure that ALL documents must be entered in DMA before
submission. DMA unit to ensure the same in case of any negligence documents will
be returned to the branches on spot for necessary compliance.
vi. DAC unit of respective CAD Hubs to ensure feeding of Collateral in BAHL System.

Islamic Banking
vii.
vii.
It is the responsibility of CAD to review all Financing and security for adequacy and
correctness prior to issuance of Disbursement Authorization Certificate [DAC].
viii. CAD should ensure that, in all Financing / support / collateral documentation, the
names of persons signing the document (including witnesses) are clearly identified
by writing the names in pen below the signature on the documents.
ix. Shariah Approved Process Flow of all fund base facilities must be available at the
time of review of documents. In case of non availability approved Deferral duly
endorsed by RSBM must be in place.
x. Signature on all documents must be verified by respective RM / IBB or attorney

holder.
xi. Third party guarantees (personal/corporate) should be obtained as per the

approval / arrangement on a case to case basis.
xii. For third party companies registered with joint stock their Memorandum and Article
of Association should contain necessary clauses for extending third party
guarantee / security and in case of any clarity clearance of Legal Affairs Division /
legal advisor on bank’s approved panel to be furnished by Business Units.
xiii. All State Bank of Pakistan Prudential and other regulations / local laws (e.g. fiscal
stamping of documents) / instructions in Bank’s circulars/manuals should be
strictly followed.
xiv. Exceptions if any should be authorized by the competent authorities as per Bank's
policy.
xv. Business Units / branches will be responsible to arrange approvals / deferrals /

clarifications etc. as identified by CAD.
xvi. CNICs of Proprietor, Partners, Directors, Guarantors and 3rd Party witnesses must
be in place.
After reviewing all Financing & Security documents, if all else is in order respective DAC
unit will issues Clean DAC duly signed by two [02] authorized signatories and DAC is to be
copied to all concerned including Business and others pursuing CAD functions.
In case of any deficiency, respective CAD highlights the exceptions to the concerned RM /
Business Units / IBBs for resolution and/or arranging waiver/deferral from competent
approving authority as per the bank’s policy. Upon receipt of approval from competent
authority for deferral / waiver, respective will issues Conditional DAC till validity of deferral
& Clean DAC in case of waiver.

Islamic Banking
In
case of Conditional DAC, upon receipt of approval from competent authority for Deferral of
further period, DAC Unit will issue another Conditional DAC till further deferral period,
while in case respective BUs / IBBs resolve the issues a Clean DAC to be issued.
Moreover, DAC should be issued upto the validity of any relevant Charges / Security
documents / Valuation report / Expiry of Insurance/Takaful coverage of collateralized
assets / Deferral or upto the expiry of AFs whichever is lower.
19. PROCESS FLOWS:
At BAHL, a customized process flow duly approved / supported by RSBM for all the
products is in place. In case of any new product, it is the responsibility of Product
Development Department to devise the process flow for the same & get it approved from
Shariah Board/ RSBM. No transaction would be processed by CAD Operations in the
absence of Shariah approved customized process flow and or deferral.
20. DOCUMENTS REQUIRED FOR REVIEW:
Documents required by CAD Hub Islamic Banking for review includes following.
However, in broad spectrum review of documentation rotates mainly amongst the
following-features:-
a. Nature / Type of customer

b. Nature of Security
20.1 General Documents for Review
Following documents are classified as part of General Documents and should be obtained
duly perfected as stated in the processes to follow hereunder:
i. Proprietorship Declaration Letter

ii. Deed Of Partnership (For Partnership Firms)
iii. Partnership Resolution (For Partnership Firms)
iv. Board Resolution on BAHL Format (For Limited Companies)
v. Memorandum & Articles of Association of a Company along with COI & COCOB
vi. Form A & 29, Form IV duly attested by SECP
vii. Bylaws / Trust Deed (For Trusts/Associations/Clubs Etc.)
viii. CTC of The Gazette of Pakistan with Registration Number
ix. Modarabah Authorization Certificate & Prospectus under Modarabah Ordinance
x. Latest Search Report From SECP and No Objection Certificates ( for Ltd Co.’s)
xi. LAF, BBFS
xii. Any Other Documents As Per Credit Approval

Islamic Banking
21. NATURE / TYPE OF CUSTOMERS:
In order to accomplish the documentation formalities, first step is to identify the customer
category. Approvals must contain details of customer category & all the Financing &
Security documents must be executed in the following manner. There are various types of
customers with varying features and implications however, the customer categories
generally falling under following classifications which includes:
i. Individual (Single or Joint):

ii. Proprietorship
iii. Partnership
iv. Joint Stock Company
v. Associations, Clubs and Societies
vi. Government Departments
vii. Others
21.1 Individual (Single or Joint)
Any customer having capacity to make a valid contract / agreement with the bank in the
individual capacity is classified under this category and it can be one as a single entity or
joint of two or more persons. In this category customer executes the documents by signing
off only without any stamp.
In case two or more persons, intend to borrow will execute all the documents in individual
capacity by signing the documents jointly.
 Copy of valid CNIC & NTN Certificate of Individuals to be obtained.
21.2 Proprietorship
A company / business owned & operated by an individual is called proprietor. A

proprietorship concern company is a singly owned company. In this category proprietor
executes the documents by signing off along with company stamp.
 Copy of valid CNIC & NTN Certificate of the Firm.

 Proprietorship declaration
21.3 Partnership

Islamic Banking
Partnership has been briefly defined in section 4 of partnership Act, 1932 as:-
“The relation between persons who have agreed to share the profits of the business
carried on by all or any of the acting for all,”.
Partnership can be created by agreement whether oral or written. Persons who have entered
into partnership are individually called partners; and their collective group is called a firm.
The partnership firms are constituted of two or more partners. There are two types of
partnership firms:
i. Registered firms where deed of partnership and all amendments thereto are
registered with The Registrar of Firms, (name of city) under Form ‘C’ & Form ‘D’.
ii. Unregistered firms where deed of partnership and all amendments thereto are not
registered.
21.3.1 Partnership Resolution
The partnership firms in which the partners are allowed to obtain banking facilities from the
banks/financial institutions may authorize certain partners to negotiate facilities with the
banks/financial institutions and execute necessary legal documents there-against.
i. Copy of valid CNIC & NTN Certificate of the Firm

ii. Partnership Resolution on bank's approved format
iii. Partnership Deed
21.3.2 CTC of Partnership Deed (Registered / Unregistered)
A written agreement made by the partners at the time of forming the partnership is called
partnership deed. It spells out all the terms & conditions under which the business of the
firm is conducted. The partnership deeds mainly constitutes details such as: name of firm,
business address, names of partners, percentage of share of each partner, special
authorization / clause (if any) etc.
The deed of partnership stipulates the governing terms and conditions of a partnership firm
including their Borrowing Powers and authorised partners to negotiate facilities with the
banks/financial institutions and execute necessary legal documents there-against.
Therefore, before allowing any transaction, copy of Notarized deed of partnership of the
firm duly certified by Registrar of Firms (in case of registered partnership)/ authorised
partners should be obtained for review and perfection of financing and security documents
accordingly.
Provided Deed must contain Borrowing Clause. If not available then customer will arrange
Amendment in the Deed duly Registered / Notarized by Lawyers. If all the partner's signed
all the documents than there is no need to incorporate the same clause as endorsed by LMA.
Islamic Banking
In
case of death of any partner, partnership firm is liable to dissolve, therefore all amounts due
to the bank from the firm should be settled immediately. Except, where terms and
conditions of the partnership allow dissolution at will then remaining partners may at their
discretion dissolve the partnership or amend the deed of partnership and substitute the
deceased partner with his successor/another person according to their mutual agreements.
In case of continuation of the firm, the bank may continue its banking relationship with the
firm, however, it is prudent to get the balance confirmation signed by all the partners of the
firm after any amendment in the partnership structure.
In case of any ambiguity in the terms and conditions of deed of partnership, guidance from
Legal Division may be sought.
Important Note:
All other terms & Conditions of "The Limited Liability Partnership Act, 2017 to remain
intact"
21.4 Joint Stock Company
As defined in the companies ordinance 1984 a joint stock company is an association of

individuals for transacting any business for acquisition of gains, possessing a common
capital contributed by members constituting it; such capital being commonly divided into
shares, of which each possesses one or more and which are transferable by the owner.
When such an association is incorporated according to law, it becomes “an artificial person
created by law with a common seal and perpetual succession” and it is regarded as a legal
person, separate and distinct from its members. As per the requirement and to become the
legal entity, such companies are used to register with SECP and are called as (LLC) Limited
Liability Company.
i. Copy of valid CNIC & NTN Certificate of the Firm.

ii. Board Resolution on bank's approved format
iii. SECP CTC of Memorandum & Articles of Association of a Company along with
Certificate of Incorporation & Commencement of Business
iv. SECP CTC of Form A & 29
21.4.1 Board Resolution (BR) (For Limited Companies registered with SECP)
The Board exercises powers through a resolution and in the resolution of the Board may
nominate a person(s) to execute necessary financing / charge / security documents on
behalf of the company. It is therefore, necessary that whenever a Company requests a
financial facility, Board Resolution (BR) be obtained on bank’s standard format, in case of
Islamic Banking
any change in format Legal Clearance to be obtained. BR to be obtained once at the time of
availing credit facilities by the customer while fresh BR is to be obtained upon any material
structural change in company like change in management etc.
Further to above, such companies authorize their officials/directors by way of BR to

negotiate facilities up to a specified/open limit with the banks/financial institutions and
execute necessary legal documents there-against.
Fresh BR must be obtained before allowing enhanced facilities (if existing BR is of less
amount/) and restructuring/rescheduling, if necessary.
Authorization of any person by the company other than directors must be in conformity
and in parity of the company's Memorandum & Articles of Association.
All other terms & Conditions of "The Company's Act, 2017 to remain intact"
21.4.2 Certified copies of following documents by SECP
21.4.3 Memorandum and Article of Association
Memorandum
It sets out the objective for which a joint stock company is formed and also defines the scope
of its activities. It also embodies the address of the registered of the company, the amount of
it capital and its distribution onto shares of fixed amount declaring the fact that the liability
of the members is limited, borrowing powers of the company and to offer securities there-
against.
Article
The articles of association contain the rules and regulations for the internal management of
the company. Generally contains:
 Power vested by the directors

 Borrowing powers of the company and types of securities offering there-against
 The main section which is required to be ascertained by CAD is the “Borrowing powers
of the company and types of securities a company may offer there-against”.
 Security in case of third party corporate guarantee / mortgage of property / security
related clauses must be incorporated in the Memorandum and Article of Association,
Special Resolution to be obtained along with legal opinion.
21.4.4 Certificate of Incorporation

Islamic Banking
It
is
used by the Registrar of Joint Stock Companies and is conclusive evidence to the effect that
all the requirements of the law in regard to formation and registration of the company have
been duly complied with and the company legally came into existence. In Case of Change
in Company’s name, Co. may use its old name along with new name for a period of 90 days.
21.4.5 Certificate of Commencement of Business
When the Registrar of Joint Stock Company is satisfied that a public limited company has
fulfilled all the requirements with regard to the subscription of shares, submission of
statutory declaration and other requirements of the law, the Registrar of Companies issues
this certificate.
21.4.6 Form - A / Form IV (To be obtained initially and then on annual basis):
Every company having share capital is required to file annually Form A with the relevant
Companies Registration Office, SECP. It provides a comprehensive overview of the
company that includes list of Current Directors and other officers of the company, members
and debenture holders of the company.
Thus, it is an important document to be obtained at the time of extending finances to its

customers and thereafter on annual basis.
Form IV required from newly registered Companies with SECP.
21.4.7 Form - 29 (To be obtained initially & then on once in 03 years or any change in
directorship)
It is a document whereby the company notifies, the particulars of its directors and other
officers and any change in the same.
Therefore, it is also an important document to be obtained at the time of extending finances

to its customers and thereafter on the occurrence of any change in the directorship and /or
other officers of such customers. However, if there is no change in company’s directorship
this may be obtained once in three (03) years.
21.5 Bylaws / Trust Deed (For Associations, Clubs and Societies etc.)
This document stipulates the governing terms and conditions of a trust/association/club

including their borrowing powers and authorized persons for negotiation of facilities with
banks/financial institutions and execution of necessary legal documents there-against.
Usually resolution duly certified by the secretary and chairman of the trust/association/
club nominating official of the trust/association/club to perform such activities is provided.

Islamic Banking
However, in the absence of such powers or any ambiguity in the terms and conditions,
necessary authorization document in consultation with LD should be obtained.
A certificate of registration is issued after its bylaws or approved and found fit for
registration. According to the bylaws, the affairs of the organization are administrated by
an Executive Committee, or Managing Committee, by whatever name it may be called.
While extending financings to these bodies special care should be exercised. Charter of
incorporation, by-laws as well as proof of their registration should be carefully examined
before granting any facility.
Clear legal opinion from bank’s internal legal affairs division / legal advisor on bank’s
approved panel should be obtained prior to extending finance, regarding borrowing powers
& Opening of Account and charging of security and other requirements.
i. Clear legal opinion regarding borrowing powers and on security requirements.

ii. Certificate of Registration.
iii. By-laws / Rules and Regulations.
iv. Resolution of the Governing Body / Executive Committee for obtaining finances
authorizing the person(s) to execute charge / security documents on behalf of Co.
v. Copies of valid CNICs of authorized person(s).
vi. List of authorized member(s) / person(s) with their specimen signatures to ascertain
and to cross match the signatures of the authorized member(s) / person(s).
The main clause which is required to be ascertained is the “Borrowing powers of the
institution and types of securities an institution may offer there-against”.
21.6 Government Departments
a. Federal, Provincial and Local Government Bodies
For all advances or facilities to the Federal Government/Local Government or related

entities the lending documents should be signed by the Government officials authorized to
sign such documents and the decrees authorizing them to do so must be carefully checked
and copies kept on Bank record. Legal Clearance from legal affairs division should also be
obtained.
b. Universities, Government corporate bodies
Financing to universities must be carefully analyzed. Legal Opinion should be obtained to

analyze borrowing clauses i.e. persons authorized to borrow, purpose of borrowing and
assets which can be offered as collateral. Clearance should be obtained from Credit Division.

Islamic Banking
All other documents as specified above on account of Association, Clubs & Societies will
be required.
22. NATURE OF SECURITY:
22.1 Credit Approval
While allowing facilities to the customers, it should be ensured that Credit Approval duly
approved by the competent approving authority/ies as per delegation of authority. It
should also be made sure that cuttings/amendments with pen are properly authenticated
by the competent authority/ies.
In case Credit approving authority requires any other documents / any Special condition (if
any) mentioned by competent authority(s) [e.g. an undertaking /Indemnities pertains to
missing Takaful / insurance clauses and securities etc., the same should be obtained in
consultation with the LD, must be complied by all CAD Hub Islamic.
22.2 Deferrals and Exceptions / Waivers Policy
The Deferrals and Exceptions / Waivers Policy identify the various approval levels for
specific situations. While RMs should always aim to conduct business without the need for
such requests, given business dynamics such requests will be required to allow the Bank to
remain competitive. The purpose of having a deferrals and exceptions / waivers policy is to
have a disciplined approach to handle such cases such that the Bank is not exposed to
unidentified risks. Such requests should be supported by cogent reasons.
22.2.1 Other Deferral / Waiver Requests
Besides the specific situations covered above, there may be other miscellaneous deferral or
waiver requests that Business Unit may raise. In all such cases, the relevant approving
authority as per delegation matrix may approve the request via IOM based on proper
justification.
22.2.2 Extension in Deferrals
In exceptional circumstances, the Business Unit may require an extension beyond the period
specified. Therefore, in such cases, the Business Unit should raise an IOM seeking further
deferral for a specified period with proper justification (including remedial measures
available to the Bank to protect its interests).

Islamic Banking
22.2.3 CAD Approach for Deferrals / Waivers
Before issuance of DAC, all CAD Hubs to ensure compliance of all terms & conditions and
perfection of approved security arrangement thus all the credit facilities should be instituted
upon issuance of DAC / authorization by respective CAD Hubs. Any deviation / deferral /
Waiver or any other exemption on must be supported by approval of competent authorities
as per bank's policy.
23. SCRUTINY OF OFFER LETTER, FINANCING & SECURITY DOCUMENTS:
While reviewing Facility Offer Letter, Financing & Security documents following aspects to
be scrutinized:
i. All the aforesaid documents obtained on an approved draft duly vetted by Legal
and endorsed by Shariah Board/ RSBM.
ii. Shariah Approved Process Flow of all fund base facilities must be in place before
institution of limits.
iii. All the documents obtained after approval of credit limits in all cases i.e. fresh,
renewal, OTT, EOL, extensions, enhancement, rescheduling etc.
iv. All the documents should be properly executed (signed & stamped), witnessed,
signature verified.
v. Any special condition as per approval pertinent to customer specifically worded
to be mentioned in the section “Facility Specific Conditions”.
vi. Nature of facility, limit amount, pricing, repayment status, expiry of limit, tenor
of facility to be mentioned as per approval.
vii. All necessary fields are completely filled-in as per set guidelines.
viii. Properly signed & stamped by two authorized signatories of IBB / Bus having
P.A. Number.
ix. Any addition / deletion in standard clauses / contents of FOL & Agreements
should be supported by approval of competent authority, Legal & Shariah
concerns must be in place.
x. All the standard terms and conditions are intact or approval of competent
authority is in place in case of any clause missing.
23.1 Accepting change in our standard documents
If, due to any reason, a non-standard document is to be accepted or obtained, the matter
should be referred to Legal Department / Advocates for drafting. However, certain clauses
(of our standard documents) which may be irrelevant for certain borrowers (as per facility
and security structure), deletion of the same may be allowed after its approval by the Credit
Division / IBD/ Shariah & Legal Division. However, in case the clause is either relevant or
partially irrelevant, the matter will be referred to the Central Credit Committee for their
consideration.
Islamic Banking
23.2 Witnessing and Signing of Documents
All Transaction and Charge documents must be signed by the borrower / security holder
on every page of the documents along with Rubber Stamp of the firm/ Company where
required. Whereas;
Staff signing charge & security documents on behalf of BAHL must affix full signature and
Bank's stamp on each page mentioning P.A. number under their signatures.
Moreover, all documents must be properly witnessed as per Qanoon-e-Shahadat Act. Only
on agreements, where banks officials are also signing along-with the borrower, one witness
can be from the bank side (but not the one who is jointly signing the agreement) and one
from Customer side.
If a document consists of more than one page, verification of the signature on the last page
would be sufficient.
On Charge and Securities documents, signatures should be verified by led pencil by putting
proper initial and mentioning “SV” by an officer other than the one who witnesses or Signs
the Transactional / Financing Agreement on behalf of the Bank.
Witnessing must be done the day the Charge / Security / Financing / Transactional
Agreement is signed & stamped.
The Officers signing the Charge / Security / Financing / Transactional Agreements, on

behalf of the bank, must be a holder of an Attorney Number. (Note: Two officers of the bank
must jointly sign the agreements or any other documents / letters).
23.3 Lien over Cash Securities
This is the bank’s right of liquidation of liquid securities in case the borrower or third party
borrower defaults in payment of monies due to the bank. Facilities can be availed against
such securities pledged Lien by third parties as well.
As per the definition of Prudential Regulations, liquid securities are the assets which are
readily convertible into cash without recourse to a court of law and mean
encashment/realizable value of government securities, bank deposits, certificates of deposit,
shares of listed companies which are actively traded on the stock exchange, NIT Units,
certificates of mutual funds, Certificates of Investment (COIs) issued by DFIs/NBFCs rated
at least ‘A’ by a credit rating agency on the approved panel of State Bank of Pakistan, listed
TFCs rated at least ‘A’ by a credit rating agency on the approved panel of State Bank of
Pakistan and certificates of asset management companies for which there is a book maker
quoting daily offer and bid rates and there is active secondary market trading. These assets
with appropriate margins should be in possession of the banks/DFIs with perfected lien.

Islamic Banking
Letter of Lien and Authority for Shares, Stocks and Securities accepted as Collateral against
pledge of Shares: should be used for creation of encumbrance over these securities and
should be properly filled in. Only pledge of those shares duly approved by Shariah Board
or as per KMI.
This document is not required to be registered anywhere.
 In case of pledge of shares/term finance certificates as main security, such securities

quoted on stock exchange (acceptable to BAHL) and registered with CDC should be
accepted.
 Margin percentage as per credit approval or Prudential Regulations whichever is
higher should be maintained. Presently R-6 of Prudential Regulations requires
maintenance of 30% margin (calculated at market value) over outstanding facilities
and in case of erosion in the margin, margin call restriction is 25%. Other
requirements of R-6 should also be observed.
 In case of BAHL’s own investment/certificates the same should be marked under
lien by the concerned Department in the system and on investment certificate, if any.
A daily/weekly Net Asset Value (NAV) should be obtained from the ATM &
Mutual Funds Department for daily/weekly monitoring purpose.Margin
requirement as per credit approval or Prudential Regulations whichever is higher
should be maintained and monitored on a daily/weekly basis. Any shortfall therein
should be reported to respective Relationship Manager or respective IBBs.
 In case of Government Securities/Investment Certificates of other banks, lien in
favour of BAHL should be marked by the issuing bank/National Savings Centre on
the instrument/certificate. The holder of securities should sign on the back of
certificates and the issuing bank should verify the same. A letter from issuing bank,
confirming lien in favour of BAHL duly signed by the authorised signatories should
also be obtained.
 Deposit account does not pertain to any minor or any minor is not included in case
of account is in joint names. Furthermore, deposit account should also be a regular
account and not marked as dormant / deceased.
 The original instrument should be kept in the safe custody of respective CAD Hubs
of BAHL or as per Policy requirement.
23.3.1 Creation of lien over cash securities/Deposit Certificates of BAHL
 In case of lien on cash balances in savings/current/other saving product accounts

maintained with BAHL, the Branch where such balance is maintained should block
the required balance in the account and confirm the same through e-mail / LONO
along with snap shot of the system showing blocked balance.

Islamic Banking
 In case of BAHL’s deposit certificates, the issuing Branch should mark lien on the
face of the certificate and confirm through e-mail / LONO along with snap shot of
the system showing marking of lien in the system. The certificate holder should sign
on the back of the certificate and the Branch should verify the same.
23.3.2 Creation of lien over cash securities/deposit certificates of the other Banks/FIs
 In case of lien on cash balances in savings/current/other saving product accounts

maintained with other banks where such balance is maintained, BAHL should get
the required balance blocked in the account and a confirmation of the same through
a letter duly signed by the authorised signatories of that bank should also be
obtained.
 In case of deposit certificates of other banks/financial institutions, the issuing bank
should mark lien on the face of the certificate and confirm through a letter duly
signed by the authorised signatories of that bank/financial institution and
signatures of deposit holder on the back of the certificate duly verified should be
obtained. For this purpose the deposit/certificate holder should write a letter to such
bank/financial institution to mark lien, verify signature and remit liquidation
proceeds of deposit/certificate to BAHL whenever required by BAHL without
reference/recourse to the deposit/certificate holder.
 Approval from IBD should be obtained before accepting cash securities of other
banks/financial institution.
23.3.3 Proof of Lien Marking
Branch has marked the lien on the deposit account (as mentioned in the formal approval).
Copy of lien marking screen and lien marked accounts report (of the branch) from Al Habib
banking system to be obtained. All transaction and security documents, including Letter of
lien and Letter of Set Off from the depositor, have been obtained.
The lien marked on these deposit accounts shall not be released by the branches without
obtaining prior approval of respective CAD hubs of Islamic Banking.
In case of Foreign Currency deposit accounts, the movement in exchange rates should be
carefully watched and drawing powers to be reduced in case of downward change in FE
rates.
23.3.4 Term Deposits Receipts
Lien on TDR (Term Deposit Receipts) issued by our bank and by other banks should be
properly marked and copy of an instrument (showing the lien marking by the issuing bank)
should be obtained. Branch will not authorize the lien release or release the original
instrument (TDR) unless specifically authorized by respective CAD hubs.
Islamic Banking
Important Note:
Lien marking on Islamic TDRs for conventional base facilities is not permissible in any
case. Similarly, Conventional TDRs for Islamic Banking facilities as a security
arrangement also not acceptable.
Interest bearing instruments [SSC, DSC, Prize Bonds etc.] are not acceptable under any
security arrangement. However, for acceptance of Government Securities or any other non
Shariah compliant securities, specific approval from Shariah Board should be in place and
their guidelines should be strictly adhered to.
23.4 Registration of Hypothecation charge
Hypothecation charge means a charge in or upon any movables including Stocks, Plant,
Machinery, equipment and Receivables etc. created by the customer in favor of a secured
creditor without delivery of possession of such assets to such creditor as security against
banking facilities [where physical control of the security remains with the borrower].
Hypothecation charge can be on Exclusive / Specific assets or a General charge over all
present and future movable assets wherever located in Pakistan or in transit. Hypothecation
charge can be created to secure facilities availed by third parties as well.
The following are the types of Hypothecation charges:
i. Ranking charge
ii. First Exclusive / Specific charge
iii. First Pari Passu Charge (many banks jointly having first charge, as per shares)
iv. Joint Pari Passu Charge (many banks jointly having a specific Ranking charge, as
per their respective shares, but not a first charge)
v. Floating Charge
As per the prevailing set up of BAHL, registration of charges with SECP is the responsibility
of IBB / business units. However, following major aspects to be complied with: -
 It is obligatory to register hypothecation and mortgage charge over the limited

company’s assets (Current Assets, fixed assets etc.) with Security and Exchange
Commission of Pakistan (SECP) within 30 days from the date execution of
documents.
 Check from Memorandum and Articles of Association if the relevant company is
authorized to charge its assets to cover the bank’s advance.
 Amount of charge to be created over assets of the company should be as per
Approval.
 Ensure that all required documents to be submitted to SECP for registration of
charge is meticulously filled in to avoid delay in the registration of charge.

Islamic Banking
 Through the means of Search Report check that the ranking of the Bank’s charge is
as per Approval. Subsequently, obtain Search Report on annual basis (if req.) or on
each charge registration.
 NOC from other banks, if required, should be obtained to place our bank’s charge
registered as per formal approval. In case the property, where hypothecated goods
are intended to be stored, is mortgaged to any other bank, Letter of awareness to be
obtained.
23.4.1 Registration of our Bank’s Charge (For Private and Public Limited Companies
Only)
It is mandatory to register bank’s hypothecation and mortgage charge over the assets of the
Limited companies (both Private and Public Limited) with the Security and Exchange
Commission of Pakistan (SECP).
 Ranking and Amount of Charge created over the assets of the company should be
strictly as per formal approval. CAD to ensure that branch arranges the required No
Objection Certificates, if applicable, from other banks, prior to the registration of
charge.
 CAD / Branch to ensure that all required documents being submitted to SECP for
registration of our bank’s charge are meticulously filled-in to avoid any delay in the
registration of charge. The Charge request should be filed within 30 days of the
execution date of the charge document.
 In case the SECP Office is located in the same city (as of CAD hub), all charge filing
applications should be filed within 2 working days (subject the same being complete
in all respects). In case of other locations, branches may also be authorized to file the
charge applications only after the document’s review of respective CAD hub.
 No disbursement shall be allowed before obtaining the Charge Registration
Certificate from SECP. In case of Acknowledgement of filing is available along with
E -Challan proper deferral must be held from approval authority.
 After obtaining the Registration Certificate, CAD should ensure from the search
report that the details and ranking of the Bank’s charge is appearing on the
Certificate and in SECP records as per approved terms. Search Report must be
arranged each time when charge is modified.
 No Objection Certificates, if approved by the competent authorities, shall only be
issued by the respective CAD hubs duly approved by Shariah Board & vetted by
Legal Division. Branches are not allowed to issue NOC letters to other banks for the
up-gradation / enhancement / Vacation of other bank’s existing charges or for
creating any additional hypothecation charge on Customer’s assets. Similarly, any
NOC received by the branch from other bank shall be reviewed by CAD hubs. Legal
opinion, if deemed required, shall be taken by the respective CAD hub.
 CAD hubs may also utilize the outside agencies that provide the services of filing the
Registration forms in SECP and obtain registration certificates and search reports.
The charges for this service shall be borne by the respective borrowers.

Islamic Banking
 Hypothecation Charge documents of borrowers having a constitution of Individuals,
Sole Proprietorships and Partnerships are not required to be registered.
Important Note:
For Hypothecation over Goods & Receivables, drawings in the accounts are to be allowed
according to the available Drawing Power i.e. the net value of hypothecated Assets after
deducting Applicable Margin.
23.4.2 Pari Passu Hypothecation Charge
 In case of Pari Passu arrangements, charges of all lending banks are ranked on the
same level. This arrangement could be in the form of one agreement being jointly
signed by all the member banks (syndication) or each bank files their own
Hypothecation agreement separately (along with NOCs from all other charge holder
banks).
 In case our bank is a lead bank in syndication, the draft agreement should be
finalized in consultation with the agreed legal counsel & Shariah Board and
circulated to the customer and other member banks, initially for their comments /
approval. After the execution of the agreement by all member banks, the same shall
be filed in SECP for registration. In case of Joint Pari Passu agreement, prior
Charges, if any, of the member banks should be vacated after the execution and
registration of the Pari Passu Charge agreement.
 In case some other bank is leading syndication, legal opinion on the draft
agreements should be obtained from our own legal counsel, if required. CAD shall
ensure that our bank’s facilities, charge amount and other security details have been
included in the draft as per our formal approval. It is also important to note that all
banks’ exposures are being covered in the same manner and without any
discrimination. All these draft agreements have to be finally checked and approved
the CCAD / Credit Division.
 The original documents (in case of syndication) are held by the Lead bank and its
attested copies [CTC] are provided to the member banks for their record. The
agreement should also clearly spell the responsibility of Lead bank in ensuring the
arrangement and distribution of attested copies of Insurance policy and stock
reports to all member banks.
23.4.3 Pre and Post disbursement Monitoring of Hypothecation Cases
 CAD should ensure that branches disburse the facilities after obtaining proper
Takaful / Insurance coverage, if applicable, as per agreed terms. First stock report
(prior to disbursement) should also be obtained by the branches from the Customers
Islamic Banking
and subsequently month end Stocks and Receivables positions, as the case may be,
should invariably be obtained by the branches.
 Minimum margin of 25% on stocks and 10% on Receivables to be ensured (unless
lesser margin has been specifically approved). In case of any shortfall, the matter
should be immediately taken up by the branches with the customer and proper
reasoning should be obtained. CAD hubs are required to report these instances in
their periodic returns to Central CAD.
 Branches are required to obtain stock reports even in case limits are not being
utilized by the customer (but fed in the system). This is also applicable in case of
credit balance in the account at month end i.e. unutilized limit.
 In case of Hypothecation charge over receivables, detailed Receivables list along-
with their terms and ageing should also be ensured on monthly basis.
 CAD shall report the cases to upper management where stock reports are not being
submitted regularly and also follow up the same with the respective branches.
 CAD will also be responsible for ensuring regular stock inspections by the branch
officials. However, keeping in view its technical nature, services of reputable
external agencies may also be used by CAD hubs to outsource some part (where
exposures are comparatively low or very high and / or the nature of business and
products are too technical) of this important routine exercise.
 As per our existing procedural requirement, branches are required to inspect the
hypothecated stocks every year / 3 months period and prepare the report as per our
prescribed format and keep the same in their records. However, in case of any
negative findings, they are required to report the same immediately to their
respective CAD hub and IBD for immediate remedial / corrective action.
23.4.4 Creation of Charge / Securities in Joint Arrangement
The securities, as discussed above can be created in favour of a bank/financial institution

(segregated charge) as well as favoring several banks/financial institutions (joint charge)
under one set of charge documents.
In joint arrangement, one bank/financial institution is appointed by the company/firm as

Lead banker who arranges for drafting of charge documents, circulation thereof to other
banks/financial institutions for their approval of terms and condition and confirmation of
their facility and charge amounts. Upon approval of the related charge creating instrument
by all charge holders, the lead banker circulates the final print on stamp paper for signature
by all of them and submits the complete set of documents with SECP for registration
(charge over assets of partnership/proprietorship firms, trusts, associations and clubs is not
required to be registered any where therefore, there will not be any charge registration
certificate).
Upon receipt of Charge Registration Certificate, the lead banker provides certified copies
[CTC] of the complete set of documents / Holding Letter / Policies / Pre & Post Legal
Opinions to other joint charge holding banks and holds the original set of documents under
its safe custody. The same procedure goes for the modification of such joint charge.
Islamic Banking
In
some cases the company/firm holds the original set of documents under its safe custody
and provides certified copies of the complete set of documents to joint charge holding
banks, such arrangement should be approved by the respective approving authority,
There are no standard drafts of joint charge Agreements/ Supplemental, therefore, approval
from Legal Division, vetting from Shariah and IBD should be obtained on case to case basis.
For vacation of charges of a bank/financial institution from joint charge arrangement, Deed
of Release will need to be signed by charge vacating bank/financial institution duly vetted by
Legal Division.
23.5 Pledge of Goods & Shares
The bailment of goods as security for payment of a debt or performance of a promise is

called “pledge”. The bailor in this case called the “pawnor”. The bailee is called the
“Pawnee”. Pledge can be of Shares, Commodities, Scraps, Ships, plant & machinery as well.
Ideally to ensure that the pledged goods are secured, the goods should be stored in the
bank’s own godown/storage premises, however, since usually the banks do not have the
storage facilities of their own, the pledge is taken at customer’s owned/rented premises
under the custodianship of a Muccadam appointed by the bank.
Pledged goods must be stored in godown under dual lock and key (One key each with
Muccadam and the customer) and in case of open pledge, approval from respective
approving authority should be in place.
Following charge documents should be used for pledge of goods:
 Letter of Pledge Should be signed by the company/firm’s authorized signatory(ies).

Further details of commodities being pledged should be specifically mentioned in
the prescribed section of Letter of Pledge document.
 Letter of disclaimer to be obtained prior to disbursement in case of rented premises
(for rented premises, tenancy/rent agreement along with CNIC of owner) or where
goods are to be stored in property mortgaged with any other bank.
 Letter of awareness to be sent to other banks incase of their general hypothecation
charge over inventory exists. The purpose of this letter is to make them aware that
our pledged goods are not under their hypothecation charge.
 Maccadam appointment Letter will be issued by respective CAD Hub after
getting approval from respective unit duly signed by authorized officials of CAD
Hubs and courier the same to the vendor.
 Maccadam to take over the stock at pledged site by placing boards bearing bank’s
name and completing other formalities.
 Pledge Site approval for Single / Multiple locations to be obtained from respective
unit by RM / IBB before institution of limits against Pledge Stocks as per BAHL

Islamic Banking
Policy. On every renewal and or addition of New Location, fresh Approval to be
sought by Business Unit from respective unit
 CAD Operation Officer should maintain MIS for expiry of takaful /insurance policy
and should also maintain separate DP sheets for the customer as per the facility.
Also maintain record of prices of commodities to be pledged obtained from Market
Committee Rate Sheet; published in Business Recorder / DAWN newspaper /
relevant internet site.
Important Note:
As per New "The Companies Act, 2017, Limited Companies are bound to registered their
Charges with SECP against Pledge Facility.
CAD / Branch to ensure that all required documents being submitted to SECP for
registration of our bank’s charge are meticulously filled-in to avoid any delay in the
registration of charge. The Charge request should be filed within 30 days of the execution
date of the charge document.
No disbursement shall be allowed before obtaining the Charge Registration Certificate from
SECP. In case of Acknowledgement of filing is available along with E -Challan proper
deferral must be held from approval authority.
23.5.1 Pledge of Commodities
In case of pledge of commodities, drawings in the accounts are to be allowed according to

the available Drawing Power i.e. the net value of pledged commodities after deducting the
required margin amount from the current market (as per approved pricing mechanism) or
Invoice value (in case of imported merchandise), as the case may be.
CAD Operations shall also be responsible for maintaining the pledge accounts drawing
power positions at their end and allow the outstanding in the accounts accordingly as per
available Limits. Branches will be required to forward the copies of pledge reports, which
are being received from Mucaddams, to the respective unit and feeding of Updated Stocks
Position in BAHL System.
23.5.2 Storage arrangements
Proper storage arrangements are in place for the goods intended to be received under
bank’s pledge. Muccadam’s name should also be suggested (from our approved list) by the
branch in their formal approval. Respective Unit may also suggest any other Muccadam’s
name (in consultation with CAD - IB and from the approved list only) in order to ensure fair
distribution of risk.

Islamic Banking
CAD should ensure that the godown is suitable for storage of goods, preferably after
receiving the copy of visit report prepared by the branch and Muccadam’s officials. Report
should include findings about the storage conditions, location, un-hindered direct access to
bank, presence of goods pledged / hypothecated by any other bank in the same premises,
Installation of Water Reservoir, fire fighting arrangements, Bin cards availability, Name of
Macadam appearance and security features should be prepared and kept for the record.
23.5.3 Rented / Third Party God-own
In case of rented / 3rd party godown, special care to be taken and copy of rental
arrangements / agreements should be obtained from the customer. It is also important to
confirm that the land (on which the godown is located) is not mortgaged to any other
financial institution. Furthermore, any hypothecation charge of customer’s existing bankers
or godown owner’s bankers (if different from the customer) should also be ascertained.
Proper NOCs / letters of awareness should invariably be obtained from the existing bankers
/ financial institutions having Hypothecation or Mortgage charge over the assets of the
customer as well as of Godown’s owner.
23.5.4 List of Authorized Signatories
CAD should ensure that they maintain a list of Muccadam’s authorized signatories, duly
signed by the CEO / Chairman of the Company, so that signatures on stock reports could
be verified.
23.5.5 Pledge of Shares
In order to create perfect lien / pledge following documents on bank standard format
should be obtained.
 For Pledge of Shares Letter of Lien & Authority for Shares, Stock & Security accepted
as collateral duly executed by Shareholder and or Company.
 Pledge of shares (of BAHL approved companies registered with CDC) subject
to clearance from Shariah Board/ RSBM.
 Details of Shares, name of beneficiary, quantity etc. must be obtained.
 Latest CDC activity report to be obtained.
 The bank’s circulars and SBP guidelines issued time to time in this regard to be
complied with meticulously.
Islamic Banking
 CAD Operations is responsible to calculate D.P over pledged shares on
daily/weekly basis as per approval terms and in case of any shortfall, scale down
the outstanding exposure of the customer or arrange additional security along with
approval to cover the shortfall.
Following parameters must be complied
As per SBP Prudential regulations and also as per our bank’s policy, minimum 30% margin
(or as specified by SBP) on shares shall be ensured at all times. Any exceptions to this rule
shall be allowed only after the approval of Central Credit Committee.
Drawings against our own bank’s shares are not allowed and they should also not to be
kept in any customer’s pledge account (in CDC) even as an additional / collateral security.
Financing against Customer’s own company’s shares is also not allowed as per regulatory
requirement.
Existing Prudential regulation R-6 should be strictly followed and no Company’s pledged
shares value (Face) should exceed 30% of the Paid up value of its own or of our bank,
whichever is lower.
Drawing power against shares shall be updated on daily basis and limits shall be strictly
regulated accordingly. In case of any shortfall, branches shall be advised to immediately
contact the respective customer either to obtain additional shares in CDC (as per our
approved list) or alternatively have the outstanding reduced within the next 24 hours.
Moreover, Inform to Credit Division, CAD Hubs to take necessary measures in this regard
on immediate basis.
For the purpose of valuation, respective Stock Exchange (in which shares are kept by the
branches) index / prices shall be used. The published rates in daily news papers will be
used for this purpose. Daily rates will be updated in Al Habib Banking system by our IT
Division.
Authority letter for the release of shares will only be issued by the respective CAD hubs.
Branch will be required to forward the release request along-with their recommendations
duly endorsed by Approval authority. CAD will allow the release subject to the availability
of required cushion in the drawing power.
23.6 Property as Collateral
Mortgage is the transfer of an interest in the specific immovable property of the

company/firm/individual (mortgagor) for the purpose of securing banking facilities
extended by the bank (mortgagee). A general (present and future) charge cannot be created
over immovable properties of the company/firm/individual as charge creation documents

Islamic Banking
require details of specific properties and its title deeds. Mortgage can be created to secure
facilities availed by third parties as well.
The deposit of original title deeds (in favour of the company/firm/third party mortgagor)
and related documents with the bank/financial institution is an essential requirement of
mortgage, therefore, it should be ensured that all the original title and related documents as
per Legal Opinion are obtained from the customer and kept in safe custody.
In case of any missing documents where exception has been allowed by Legal Division or
competent approving authority an Undertaking and Indemnity from the customer and
mortgagor should be obtained.
The perfection of charge and clearance of title documents etc. should be ensured as per the
internal/external Pre/Post Legal opinions. A final clearance / Post Opinion over the title
documents from internal/external legal adviser should also be in place
In case of third party security i.e. property belonging to some other person / entity is being
given as a security, special care is required to confirm the authority of that person and / or
entity for mortgaging their assets to secure any third party debt.
In case of Companies, Article and Memorandum of Association (of both borrower and the
property owner, as applicable) should be checked to ensure that the borrower can obtain
financing against third party security and mortgagor can mortgage its assets to secure third
party debt.
Personal guarantee of the individual mortgagor and corporate guarantee in case of limited
company should be obtained or as per Approval arrangement.
Following type of mortgages can be created over properties:
23.6.1 Equitable mortgage (of full value) by way of deposit of title deeds with the bank
(physical possession is not provided to the mortgagee) by executing Memorandum of
Deposit of Title Deeds. In this type of Mortgage, the property owner simply delivers the
original title documents of the property to the bank as a security for his own or any 3rd
party’s borrowing. This is documented by means of a Memorandum of Deposit of Title
Deeds (MOTD).
In case the borrower (who is also the property owner) is a Private or Public Limited
Company, the bank’s charge is required to be registered with SECP. CAD should ensure
that all formalities are completed as per formal approval.
In some cases, these property documents are given as a “Comfort Security” only and no
formal charge and other formalities including Legal Opinion, Valuation, Takaful /

Islamic Banking
Insurance Coverage are to be completed. CAD hub/ Branch should ensure to have the
formal approval for this kind of exception / arrangements.
In case of Financing against purchase of property under Diminishing Musharaka mode of

Financing must be covered by the way of Agreement to create or act as a security under
different mode financing where the property is tagged under security arrangement and title
of the property has not been transferred to the customer via Lease / Sale deed subject to
Approval parameters.
23.6.2 Token / Legal mortgage (of a token value say Rs. 50,000/-, Rs. 100,000/- or more) by
way of Mortgage Deed registered with the property registrar to support the equitable
mortgage and prevent the mortgagor to effect any transaction in respect of the property
without obtaining prior clearance from BAHL. However, requirement for registering bank’s
charge with SECP will remain there in case of borrower (property owner) being a Limited
Company.
As per our bank’s policy, obtaining Token Registered mortgage charge (1% of FSV or Rs. 0.5
Million, whichever is less) on all properties is a must. Any exception to this has to be
formally approved.
Till issuance of Mortgage Deed from the respective Registrar, CAD Hub Islamic must retain
Original Retrieval Slip of the said instrument or any other property related document and
BAHL exposure must be covered through Takaful Coverage at all times.
23.6.3 Constructive Mortgage Charge
In case of Constructive mortgage charge i.e. Original property documents are held by some
other bank and our bank has the Pari Passu or Sub-ordinate charge. In such case if a pari
passu or ranking equitable mortgage charge is required to be registered in favour of BAHL,
a letter of confirmation from that bank for holding of original title documents of the
property for the benefit of such bank as well as on behalf of BAHL should be necessarily
obtained. The confirmation should also confirm that in case of settlement of outstanding of
that bank, the bank shall hand over the original title documents to BAHL or some other
lending bank. In case of transfer of title documents to some other bank, a similar
confirmation from that bank should also be obtained. The confirmation letter should be
signed by the authorized signatory (ies). Charge over such property is created through
23.6.4 Constructive Memorandum of Deposit of Title Deeds

Islamic Banking
CAD Hub to ensure that proper NOC (along-with CTC of entire property documents) has
been obtained from the Lead banker including holding Letter. The NOC should clearly
mention that the other bank shall not release the original documents unless authorized by
our bank.
In joint charge arrangement where holder of the original title deeds confirms the same in the
terms and conditions of joint constructive memorandum of deposit of title deeds under its
signature, then a separate confirmation will not be required.
23.6.5 Pre and Post Mortgage Legal Opinions
Business Units / IBBs should obtain legal opinion from the In House Legal Affairs
Division / Legal Advisor on bank’s approved panel to ensure perfection of mortgage
formalities. Legal opinion should cover the following major features:
 Ownership of the property

 Suitability of the property for effective mortgage against credit facilities, thereby
enabling bank to exercise and indisputable right of recourse in case of any
contingency.
 Certifying that the titles of property are clear and to ensure that property to be
mortgaged is free from any encumbrance.
 Validity of the documents
 Obtainment of Permission to Mortgage & Genuineness of the property
Branch should complete the mortgage documentation / formalities strictly as per Legal
Opinion and CAD Hub will obtain Post Mortgage opinion after compliance of formalities
there-against. Mortgage formalities are to be completed as per formal approval / Legal
Opinion. However, any exceptions, if any, shall only be allowed by the CCC.
23.6.6 Registration of charge with SECP
In case of Private and Public Limited Companies, mortgage charge should be registered
with SECP (if the property is in the name of the Company) within 30 days from the date of
execution of documents. Charge Registration Certificate to be obtained accordingly and
fresh Search report to be obtained to confirm the details of our registered charge.
The lease of properties under lease hold rights should be valid or in case of expired lease,
legal opinion supported by an approval of competent authorities to be obtained.
23.6.7 Latest Search Report from SECP and No Objection Certificates (NOCs)
(In Case o Limited Companies)

Islamic Banking
This report is obtained from SECP as charge over the assets of a limited company is
required to be registered /recorded with SECP. This report provides details of prior charges
(hypothecation/ Pledge /mortgage), if any, type of charge, name of the instrument(s), date
of registration, name of the banks/financial institutions and details of assets of the company
whereon charge has been created. The details contained in search report facilitates the bank
to check the requirement of No Objection Certificates (NOCs) to upgrade the bank’s ranking
charge in to Pari passu Charge with prior charge holders.
NOCs from the prior charge holder(s) (whose date of registration of charge is prior to the
bank) is obtained to bring the charge/encumbrance of the bank to equal footing with the
prior charge holder(s), since in the absence of NOCs, the bank will not be able to get
equal/proportionate sharing in the sale proceeds of the assets, in case customer defaults and
the charged assets are required to be sold or customer makes any payment through court.
Upon receipt/perfection of all NOCs, the same should be registered with SECP by BU / IBB
within 30 days of receipt/perfection thereof.
In case of any modification in BAHL’s charge fresh search report should be obtained from
SECP to ensure that such modification is well recorded in SECP’s record. Regardless of any
modification in BAHL’s charge fresh search report on an annual basis/and or when
required should be obtained from SECP and checked that BAHL’s charge is intact.
24. MONITORING OF HYPOTHECATED/ PLEDGED/ LEASED/ DIMINISHING

MUSHARAKAH / MORTGAGED ASSETS’ VALUATION / INSPECTION REPORTS:
Monitoring of hypothecated/pledged/Leased/ Valuation/ Inspection/ Takaful / Insurance

will be conducted from time to time by CAD with collaboration of Credit Hubs as detailed
under:
24.1 Valuations of Hypothecated/Leased/Mortgaged Assets
Valuations shall be carried out by an independent professional evaluator who should be

listed on the panel of evaluators maintained by the Pakistan Banks Association (PBA) and
on BAHL approved vendor. While assigning the evaluation, approved PBA & BAHL Limits
to be followed.

Islamic Banking
Valuation must be undertaken at intervals as specified in the Approval or as advised/laid
down policy by the Regulator. The valuation should be arranged through respective CAD
Hubs and following key features must be adhered to:
i. Valuation shall be arranged upon written intimation from Business & or as per
requirement. CAD Hub Islamic will retain Original Valuation Report of all Assets.
ii. Valuation of assets shall be arranged upon receipt of copies of title and other related
documents from Business.
iii. For valuation of all assets, Business shall provide the contact number of the person
from customer’s side with whom the valuator will coordinate for the survey of
assets.
iv. Nomination of evaluator shall be done by CAD Hub Islamic for arranging
valuation.
v. In case of any genuine discrepancy observed by CAD and/or Business in the
valuation, CAD - Business to arrange for the rectification of the same by valuators.
vi. To receive and forward the valuation report along with valuator’s bill to Business
for arrangement of funds for onward payment to valuator.
vii. While monitoring, valuations it should be ensured that required value along with
appropriate margins, are according to Credit Approval. In case, the values of
imported assets are less, than the outstanding there-against, the same should be
reported to Business and RMD- for necessary instructions from them.
viii. The valuation of hypothecated assets shall be conducted upon specific request from
Business or if required by respective approving authority or as per Policy
requisition.
ix. Full Scope Valuation duly conducted by a professional valuator listed with Pakistan
Banks Association [PBA] is valid for 3 years, thereafter a fresh valuation will be
required for which proper follow-up should be made by CAD with Business for
timely revaluation of fixed assets including Policy of enhanced insured amount due
to increase in the value of property [Civil Works].
x. Desktop valuation to be followed as per SBP parameters as defined in Prudential
Regulations.
xi. Market value as well as forced sale value of the assets should be covered.
xii. The nature of the property (i.e. commercial, industrial or residential) should be
disclosed.
xiii. Occupancy status of the property to be discussed in the report that whether it is
occupied by owner or on rental basis.
xiv. Subsequent re-evaluation of assets should always be obtained from different
surveyors.
xv. As per Housing Finance Regulation issued by SBP, 02 different valuations required
where exposure above Rs. 10 M allowed against Housing Finance.
xvi. Photographs should be included with the reports.
xvii. If any valuation conducted by approved / non approved vendor at the request of
Customer or at the request of any other bank, approval regarding acceptance of
same must be in place duly approved by CCC.

Islamic Banking
As per guidelines, the fixed assets imported through BAHL or other banks should be
evaluated as follows:
 No requirement to conduct valuation of New Imported Fixed Assets under LC or as per

BAHL - IB Policy. In such case the value of fixed asset to be based on commercial
invoice, duties/ taxes and transportation costs provided as supporting evidence.
 In the event of import of refurbished fixed assets a certificate from recognized
international surveyor of useful life by the supplier / manufacturer to be provided
along with commercial invoice, duties / taxes and transportation costs, otherwise,
Fresh valuation by BAHL approved valuator may be conducted after disbursement to
avoid demurrage at port.
 For Used Assets & Imported Vehicles Fresh valuation to be arranged and or comply
the approval terms and conditions.
 Price Verification to be done subject to approval.
 In case the transaction of the tenor is more than three years, Business/CAD to ensure
that the valuation of these imported fixed assets by BAHL’s approved valuator is
subsequently conducted no later than 3 years from the date of Commercial Invoice as
per existing BAHL’s policy.
 All valuations to be conducted through CAD Hub Islamic Unit. In case, if any
valuation is done by approved vendor at the request of customer, acceptance of the
same required from CCC.
 If any evaluation is conducted by Non Approved vendor, acceptance of the same
required from CCC.
24.2 Monitoring of Pledged Stocks
 CCAD unit Insurance & Vendor Management shall appoint the Muccadam from the
list of approved Macadam’s on Yearly basis or at the time insertion of fresh location.
 CAD Hub will issue Muccadams' appointment letter upon receipt of approval from
CCAD unit Insurance & Vendor Management & subsequent request form respective
BU / IBBSs.
 Pledge Site Approval for Muccadam Appointment for Single / Multiple locations to
be obtained from respective unit by RM / IBB before institution of limits against
Pledge Stocks as per BAHL Policy On every renewal and or addition of New
Location, fresh Approval to be sought by Business Unit from respective unit CAD
Operations shall monitor the value of pledged stocks/shares/securities and
Calculate the Drawing Powers on a daily basis.
 Pledge Stocks Report must be Fed in BAHL system by CAD Operation / IBB/ BU.

Islamic Banking
 Pledge Stock reports, on our standard format and duly signed & stamped by our
Mucaddams and the borrower, should be received on month end basis as well as
and when any movement (addition / deletion) in goods takes place.
 The Stock type and components are according to the items mentioned in Letter of
Pledge to be incorporated including Commodity (ies) Prices.
 In case of any shortfall in the required value of stocks in terms of Credit Approval
and/or specific instructions of Business. Business shall coordinate with the
Customer for pledge of additional stocks to makeup the shortfall within timeline as
stipulated by RMD.
 Business shall inform CAD Operations regarding pledge of additional stock via
LONO/e-mail and CAD Operations to check the same with Muccadam and obtain
updated stock / pledge report from him.
 CAD-Operations shall monitor the value of pledge Stocks at their end on
daily/weekly basis.
 CCAD unit Insurance & Vendor Management shall submit the PMR [Pledge
Monitoring Report] to CAD Hub Islamic on weekly / daily basis.
 Pledged stocks shall be inspected by BU / IBBs on 30 - 45 Days / Quarterly basis.
However, CAD representative will also inspect the stocks along with the branch
officials.
 Branches shall submit their inspection report to their respective CAD hubs. CAD
will also submit periodic reports to respective units along with their comments /
observations.
 Frequency of stock inspections may be increased keeping in view the nature of
stocks and health of borrower’s account.
 As per SBP requirement, Joint Inspection of Pledged Goods to be arranged by the
Lead / Parent bank on quarterly basis along with other Creditors.
 CAD to ensure that all necessary precautions as per nature of pledged goods are
being taken to keep the bank’s interest secured. Bank’s sign boards should be
prominently displayed inside and outside the godown where pledged goods are
secured.
24.3 Pledge Stock Inspection
Pledge of goods is a sensitive mode of security structure, hence in order to safeguard bank’s
interest a surprise visit of pledge sites to be conducted by official of CAD Hubs Islamic
/CAD Operations along with BU/ IBBs. Business team is responsible to coordinate with
customer and to rectify the CAD Hub and respective unit observations or arrange approval
from sanctioning authority where-ever required.
The officers will appraise all the necessary aspects but not limited to:
 Availability of sign board / Bin Cards

 Availability of Muccadam
 Proper Lock & Key arrangement including availability of Duplicate Key with
Muccadam
Islamic Banking
 Proper Locking system
 Availability of Stocks Register
 Any suspicious movement must be recorded
 Quality of available stocks
 Availability of fire extinguishers and validity
 Quantity / Quality of available stocks
 Installation of Water Reservoirs
 Quantity of Old Stocks Inventory Available
 DO file was maintained Properly
 Emergency Exit Plan must be available
 Data of weight Notes (In & Out) must be available
 Roof should be strong and water-proof so as to protect Go-down from rain
and / or other weather effects.
 Properly fumigated time to time
 Go-downs are situated at a suitable place where the chances of forceful lifting, theft
and robbery remain not possible and/or minimal.
24.4 Joint Stock Inspection
In accordance with PR-5 of revised SBP PRs for Corporate / Commercial, all the banks
financing any particular customer against pledge of stocks of below mentioned
commodities shall conduct joint inspection of pledge of stocks at least once in a quarter,
where aggregate exposure against such stocks equals or exceeds the amount shown against
each commodity:
The bank with the largest committed exposure (limit) shall act as the lead bank to
coordinate the quarterly joint inspection. In case two or more banks have the same level of
highest committed exposure, they shall mutually agree on which bank to assume the
responsibility.
In order to ascertain the eligible customers for joint inspections, CAD shall compile the data.
In case of customers having multiple pledge sites, multiple joint inspection exercises may
need to be conducted.
Following process follow shall be followed by the bank to perform its role as a lead or
participant bank for the joint inspection exercise:
 BAHL as Lead Bank due to Largest committed Pledge Exposure:

 Relevant BU to provide CAD, the list of banks providing pledge facilities to that
particular client.
 Relevant BU to schedule the date of joint inspection with the client and confirm the
same to the relevant CAD Hubs via LONO / email.
Islamic Banking
 Respective CAD Hub shall write letter / email to relevant banks one week before
inspection, communicating them the exact schedule, location of pledge site, names of
BAHL’s nominees for visit and shall invite them for their participation.
 If relevant BU receives an invitation for the joint inspection, it should inform CAD
Hub of the same for their records.
 In case no joint inspection is arranged, CAD Hub to maintain follow-up on a
monthly basis. Normal pledge inspections will continue to be conducted as per the
BAHL’s policy.
 An officer (RM / TL) of the relevant BU to attend such joint inspection visits. Where
possible, the representatives of CAD & Credit Division should also attend.
25. MONITORING OF STOCK REPORTS OF HYPOTHECATED STOCKS/

RECEIVABLES:
Business units / IBBs to ensure that they obtain monthly stock statements for
funded exposure against hypothecation of stocks and receivables on Ranking / Pari-
Passu /Joint Pari Passu basis from Customer and submitted to CAD on monthly basis.
Branch should also calculate the drawing powers as per standard Market Practice at their
end under supervision of CAD Operations unit & also incorporate/Fed the same [Latest
Stocks & Receivable position] in BAHL System.
Outstanding with other banks should be stated on stock reports of hypothecated stocks
including position of receivables with aging. In case, no banking with any other banks NIL
statement in respect of outstanding with other banks should be stated on the stock reports.
Stock inspection on quarterly basis should be conducted thorough bank’s appointed

surveyors and or by BU as per BAHL policy.
25.1 Checking of Stock Reports at CAD’s End
i. Signature should be verified on Stocks & Receivable reports.

ii. Total value of stocks mentioned on the stock statement should cover BAHL’s
outstanding along with prescribed margin plus outstanding of other banks.
iii. Stock reports should be on customer’s letterhead/affixed with customer’s rubber
stamp if submitted on plain paper.
iv. Age-wise break up of receivables should be mentioned in the stock report.
v. A status of stocks reports should be submitted to Business on a monthly basis.
vi. Missing stocks reports should be arranged from the customer and forward the same
to CAD under their acknowledgement.
vii. The Stock type and components are according to the items mentioned in Letter of
Hypothecation to be incorporated including Commodity (ies) Prices.
Islamic Banking
viii. In
case of any long overdue receivables appearing in the stocks reports the same should
be referred to Business and IBD. Business shall arrange for justification of long
overdue receivablesAny discrepancies in the stock reports as per CAD’s advise,
should be rectified by Business on priority basis.
25.2 Checking of Drawing Powers
 IBB / CAD Operations will monitor the valuation of pledged commodities / shares
and will also be responsible for maintaining the Drawing Power positions and
regulating the Credit limits accordingly (through Credit Management Module of Al
Habib banking System). However, CAD hubs shall also maintain these pledge
positions at their end to ensure correct drawing power calculations and limit feeding
in the system.
 For hypothecation, month end stocks & Receivable position shall be compared with
the respective month end outstanding position in the account. Any shortfall in the
security value shall be immediately taken up with the branch and periodic report in
this regard may also be submitted to the respective Unit.
 Outstanding in the accounts against the security of Pledged goods should be strictly
controlled as per available drawing power (net of margin value of goods).
 Values of Mark-up ratesKIBOR, LIBOR, Commodities / Shares Pricing shall also be
centrally fed and updated in BAHL system.
 Before the issuance of delivery orders, drawing powers shall be reduced in the
system accordingly.
26. MONITORING OF TAKAFUL/ INSURANCE POLICIES OF HYPOTHECATED/

PLEDGED/ LEASED / DIMINISHING MUSHARAKA / MORTGAGED ASSETS:
Takaful/Insurance Coverage Instructions for Hypothecated/Pledged/Fixed Assets, must be

obtained well before disbursement and kept valid all the time duly Feed in BAHL System.
26.1 Insurance / Takaful Coverage
All the assets charged to the bank (i.e. Pledge, Hypothecation, Mortgage, Leased Assets)
under security arrangement should be insured through an insurance / Takaful company on
the bank's panel and the premium against the same must be paid as per arrangement.

Islamic Banking
The insurance / Takaful limit allocated by BAHL for respective insurance companies to be
complied while accepting insurance / Takaful policies along with PPR. While accepting
insurance / Takaful policies special care should be exercised to review the same.
Important Note:
"Conventional base Insurance policies against all collaterals are not acceptable as per
instructions. However, acceptance of the same must be approved by Shariah Board of the
bank"
26.2 Insurance / Takaful – per risk exposure & Standard Grid
The Bank monitors it’s direct and indirect exposure to insurance / takaful companies. As
part of this monitoring mechanism, the BAHL has determined per risk exposure limits on
various insurance / takaful companies based on their ability to withstand large insurance /
takaful claims. While waivers for per risk breaches of insurance / takaful companies should
be discouraged, in certain cases it may be necessary to allow breaches by CCC.
All collaterals should be properly covered against all risks (as per standard / approved
industry wise Insurance Grid) as provided by respective department. Following is a list of
major risks against which the bank may seek coverage;
i. Fire
ii. Burglary & Theft (except land and building)
iii. RSD (Riot, Strike, Damages)
iv. Malicious Damage
v. Atmospheric Disturbance
vi. Flood
vii. Earthquake, Fire & Shock
viii. Explosion
ix. Impact Damage
x. Electrical shock (for plant and machinery)
xi. Aircraft Damage
xii. Spontaneous Combustion
xiii. War
xiv. Terrorism (Subject to requirement)
26.3 Guidelines for Accepting Insurance / Takaful Policies
Upon receipt of the insurance policy, it is required to be reviewed with special emphasis on
the following points:
 Obtain original insurance policy together with premium payment receipt (PPR) as
defined in bank’s policy.
Islamic Banking
 Genuineness of all types of insurance policies should be held in record.
 The insurance limits allocated by bank for the respective insurance companies are to
be adhered to.
 Where cover note is held, the same should be replaced by insurance policy within
the period stipulated or maximum 30 days period on case to case basis.
 Where the Bank is a member of consortium, obtain photocopy of the relevant
insurance policy certified by the lead Bank.
 All insurance policies are to be kept in the relevant charge / security documents
packet / pouches.
 Before expiry of the insurance policy, Bus/ IBBs to be notified through exception
report for arranging insurance policies.
 Insurance / Takaful policy and related documents to be arranged by business
groups / branches.
 BAHL’s name as loss payee and as per the borrowing relationship in line with
nature of financing such as Mortgagor-Mortgagee/Pledgee-Pledgor/Lessee-Lessor
to be mentioned in insurance policies.
 Expiry date of insurance policy to cover the tenor of the facility. In case the expiry of
insurance does not match the expiry of facility or it is expiring within the tenor of
facility then Business Unit should ensure the renewal of the same well before the
expiry.
 Description and location of insured property (stocks, plant & machinery, building,
etc.) should be the same as mentioned in Credit Proposal, Approval / Stock Report.
 In case of co-insurance, share of each insurance company is authenticated by co-
insurers and co-insurers must be on bank’s approved panel.
 Insurance / Takaful amount must cover charge on assets as per approval terms and
in case of pledge goods insurance policy upto the exposure covering applicable
margin must be held.
 In case where goods under bank’s lien have to be transported, the transit risk
coverage should also be obtained.
 Bank’s competent authority, on recommendations of Business, can relax the
obtaining of Insurance Policy if the FSV (as per valuation) of land is sufficient to
cover the finance limit / operative limit along with required margin.
 Where Night-work is applicable, the matter be referred to insurance companies for
coverage &/or exclusion of Night-work clause from warranties.
Important Note:
Details Guidelines regarding Feeding of Takaful Insurance Policies to remain intact as

received.
27. SWAPPING OF LIABILITIES:
In case of liabilities and securities take over from other Banks, CAD shall monitor / assist
the branches to ensure that bank’s interest remain protected during this transition period. In
Islamic Banking
most of the cases, disbursement in the account is required (after the issuance of Provisional
DAC by CAD) to pay off the liabilities first against the undertaking of the other bank that
they will release the security to our bank upon the complete adjustment of their liabilities.
Branch should coordinate with their respective CAD Hubs to accompany the Relationship
Managers, wherever possible, for taking over the securities from other banks (as the bank
usually has to pay and / or guarantee the liabilities prior to Or at the same time of physical
take over of securities from other bank).
However, CAD should ensure to take necessary steps to protect the bank’s interest by
obtaining letter of confirmation from the other bank, duly signed by their authorized
signatories, along-with the complete details of security documents that will be given to our
bank once the payment and / or guarantee for the outstanding liabilities have been given.
Formalities to be carried out prior to swap transaction in case of property being the
security:
i. Approval of competent authority clearly indicating mode of transaction as swap &

the name of bank involved. Besides, the approval should include the particulars of
security being swapped & also state the timelines available for security perfection.
ii. The outstanding position will be obtained from the bank and customer on their letter
head, signed and stamped by authorized signatories from the company, confirming
that the facility to be settled at existing Bank/Financial Institution.
iii. Detailed legal opinion will be obtained from In-House Lawyer / bank’s approved
legal advisor on the basis of photocopies of property documents (obtained from
customer), this opinion should be comprehensive and complete.
iv. Valuation report from the bank’s approved valuator to be obtained.
v. Search report to assess the ranking of charge (in case of registration of charge).
vi. Search Certificate from Registrar of Properties.
vii. At the time of issuance of pay Order; letter from financing customer / mortgagor
addressed to existing bank that on settlement of the financing customer’s liabilities.
viii. Pay Order favouring “Bank/FI Name” will be issued equivalent to the outstanding
amount and will be furnished to respective CAD Hub including un-conditional
undertakings (as per approved swap procedure) with regard to handing over the
original collateral / documents to BAHL and all other required NOCs with regard to
the collateral, which shall be issued after settlement of all the dues.
ix. Further, a clause must be inserted into the letter that the proceeds are in settlement
of debt owed to the Bank/FI, by the company and that upon encashment of proceeds
under the Pay Order the original deeds and related chain of documents in original
held by the other Bank will be handed over to Bank.
x. Facility Offer Letter /Term Sheet, Financing & Charge documents etc., duly executed
and witnessed to be obtained.
xi. Final legal opinion will be obtained within stipulated time period regarding receipt
of original property documents, which will confirm sighting the original documents
and confirming that their earlier opinion was in order & comfort can be drawn on
perfection of property for mortgage purposes. For any additional collateral the
Islamic Banking
perfection will be ensured by Legal Affairs Department (LAD) prior to swap or
limits will be curtailed to the extent of the value of additional collateral (pro rata
basis).
Important Note:
All swap transactions will require approval of transactions and process flow from Shariah
Board/ RSBM.
All other terms & Conditions as stipulated in BAHL Swap Policy to remain intact at all
times.
28. SYNDICATION:
Syndicated Transactions do not have any standard set of financing documents and vary
from transaction to transaction depending on their structure and the base product used to
offer the facility. Following are some of the general guidelines that should be ensured while
processing such transaction under the supervision of Transaction Lawyer:
i. Valid Credit Approval, Shariah Approved Transaction Structure and duly executed
Term Sheet should be in placed.
ii. The approval and the term sheet should ideally provide information, including but
not limited to, the purpose of the facility; its amount with green shoe option if any;
information on lead arranger(s) and participants; profit rate with bases of its
resetting if required; tenor; mode of payment; security structure; arrangement and

Islamic Banking
agency fee if applicable; information on the approved transaction lawyer; condition
precedents; covenants etc.
iii. Pre and Post execution legal clearance regarding completeness, validity, legality and
enforceability of all transaction related documents from BAHL’s approved external
lawyer/Legal Division should be in placed.
iv. Incase the transaction documents refer to any other agreement/contract executed by
the customer related to any other separate transaction, both opinions to clearly state
regarding their legality, enforceability and/or detrimental effect (if any) on BAHL’s
right under the transaction in question.
v. Both opinions to also state that all condition precedents and covenants have been
complied with at the time of execution of the transaction documents.
vi. All duly executed Original transaction related documents along with all annexures
should be in safe custody prior to the disbursement [Under Lead Arrangement].
vii. CTC of all transactional documents must be in place in case of financer under
Syndication pool.
viii. Incase of Sukuk based transactions, BU / Treasury to ensure timely submission of
Sukuk certificates/CDC book entry by the Business and its safe custody and
recording in safe-in and safe-out register. Any subsequent discharge to be also
recorded accordingly.
ix. Transactions with any observations should be allowed only upon receipt of
approved deferral/waiver or exception approval.
x. Other related monitoring tools as per BAHL Policy shall also apply.
29. ISSUANAC OF DAC (DISBURSEMENT AUTHORIZATION CERTIFICATE):
After complying all the formalities as stipulated above on case to case basis, respective CAD
Hubs will require at-least one working day for the issuance of DAC.
i. As all documentation and perfection related areas have been explained above in
detail, the DAC / Transactions / Limit should be allowed only upon
completion/perfection of all financing agreements and security related formalities.
ii. Transactions with any observations should be allowed only upon receipt of
Deferral/Waiver or exception approval from the relevant approving authority.
iii. Process flows duly approved by Shariah Board should be strictly followed. In case of
non availability proper deferral must be in place duly endorsed by RSBM.

Islamic Banking
iv.
iv.
All transaction related documents as advised by IBD duly perfect in all respects should be
in place prior to the execution of Transaction / Limit and compliance there-against
within stipulated time period.
v. In case of expiry of any Deferral or any missing document according to prescribed
timing, DAC / Transaction / Limit should be put on hold until extension of deferral,
rectification of observations or exception approval.
vi. DAC should be issued upto the validity of any relevant charge / security documents
/ valuation report / expiry of insurance coverage of collateralized assets / deferral
OR upto the expiry of AFs whichever is lower.
Important Note:
(Before authorization of Limit in our existing Al Habib Banking System, mark-up- Product
pricing, Insurance / Takaful Coverage Collateral Capturing and Securities must be fed in
the system by the respective CAD hubsand issuance of DAC will be discontinued).
30. ISSUANCE OF NO OBJECTION CERTIFICATE (NOC):
The customers pursuing for facilities from other banks in addition to facilities availed from
BAHL – IB may request for issuance of NOC in favour of other banks to create Pari-Passu
charge on the assets currently under charge of BAHL. The concerned CAD Hub will issue
such NOC(s) only upon receipt of adequate approval of appropriate credit authorities
through BUs/ IBBs and completion of all related formalities to be arranged by BUs/ IBBs.
CAD - Islamic will issue the NOCs to other banks regarding charge over assets.
 Upon receipt of request from customer for the issuance of NOC in favor of other
banks for creation of First / Rank Pari Passu Charge, Vacation of Charge with
Islamic Banking
BAHL, Business shall evaluate position of existing charges on customer’s respective
assets and provide approval for the same duly endorsed by CCC.
 BU will provide latest Search Report to CAD Hub Islamic
 CAD shall prepare NOC as per format approved by Shariah & Legal Division.
 CAD shall obtain signature of Branch Manager / Relationship Manager of
Respective IBB on NOCs.CAD shall forward the original NOC with the initials of
processing Officer + signature of respective CAD Hub Islamic Banking.
 Relationship Manager shall obtain signature of authorized signatory of Business/IB
and dispatch the original to customer and get proper acknowledgement.

Islamic Banking
REPORTING/
MIS UNIT
31. REPORTING / MIS UNIT:
MIS Unit of respective CAD Hubs will monitor Portfolio in the post-disbursement stage.
Following functions are performed by Reporting/MIS Unit:
MIS Unit on the basis of the approved Deferral / Waiver, CAD Hubs Islamic will issue
Conditional / Temporary DAC / feed the limit till the validity of Deferral / Waiver but not
exceeding expiry of AFs expiry(ies). However, CAD will follow-up with BUs/ IBBs against
all Temporary Waivers/Deferrals till such time the formalities are regularized / completed.
Report regarding the allowed exceptions and their respective expiry dates shall be
maintained by each CAD hub and submitted to Monitoring Unit on Fortnightly basis.
Islamic Banking
Other MIS reports shall also be prepared by CAD Hubs for the consumption of IB Credits,
Business, Monitoring & other units as per appended matrix for better monitoring of the
portfolio.
S. No MIS Report Frequency

1 TAT Report Daily
2 Insurance Feeding Status Weekly
3 Deferral / Waiver Report Fortnightly
4 Pending DACs Report Fortnightly
5 Stamp Papers Balancing Monthly
6 Valuation Assigned Monthly
7 Expired Docs & Limits Monthly
Expired Insurance Policies [Exposure of Rs. 10 M &
8 Above] Monthly
9 Pending Cases for Insurance Clearance Monthly
10 Tentative Pledge Inspection Report Monthly
11 Pledge Exception Report Monthly
12 CAD Performance Report Quarterly
13 Consolidated Pledge Exception Report Quarterly
14 CVLD Cases Time to Time
15 No Insurance Policies Against DM & Ijarah Time to Time
Exposure Covered under Takaful, Conventional
16 Insurance Time to Time
17 NOC Issuance Time to Time
18 Release of Security Documents Time to Time
19 Others as required by Auditors & Other Units on Demand
20 Reports for Internal Consumption Routine

Islamic Banking
VAULT
MANAGEMENT
32. CUSTODIAN SERVICES, VAULT OPERATIONS AND MOVEMENT OF

SECURITIES:
32.1 Safe-In-Safe-Out [SISO] of Financing / Security Documents
 Types of documents including Financing / Transaction, Security / Charge and

General Documents must be entered into Document Management Application
(DMA) by BU / IBB Branches before sending to CAD-Islamic for receiving,
Scanning, Safe-in and Safe-Out purpose.

Islamic Banking
 Upon receipt of Financing Agreements, Charge, Property and Security documents
from customer through Business, CAD shall ensure the perfection of documents and
any withdrawal
 Upon receiving of Temporary release document from the withdrawer, custodian
shall re-enter such document in the DMA and keep the documents in safe custody.
 Upon of releasing of documents (Permanently out) including Security documents
like property branch should provide desire approval from competent authority (i.e.
AF - 4) to CAD Hubs Islamic and must be safe-out from DMA before release and
Cancellation of Limits in BAHL System.
In order to keep track of securities for record purpose, CAD Hubs shall document
movement (in-house) in separate register “Movement Register” & "MIS Report" to be
maintained for Temporary & Permanent release of documents.
32.2 Custody / scanning of documents / maintaining (SISO) record
a) Custodian Services
 Safe in Safe out (SISO) and scanning of security/charge documents is the

responsibility of respective DMA unit working under the supervision of CAD Hubs.
 All the respective segments of CAD Hubs will ensure proper acknowledgement of
document with time / date stamped and after taking necessary steps as required
will immediately deliver all the documents (which require to be placed in security
vault) not limited to security / charge documents to vault custodian with proper
acknowledgement.
 Serialize all the documents by putting page numbers in sequence in each paper so as
to avoid displacement of any paper.
 Arrange scanning of each & every document.
 After proper scanning make necessary entries in Safe in Safe out (SISO) register.
 After satisfactory completion of all formalities, documents to be returned to
respective unit for placement in security pouch of respective customer.
 Since most of the property related documents which requires registration with sub-
registrar concerned take a reasonable time for registration process and till such time
retrieval slip(s) are received. Hence in order to keep follow up with BU / IBBs Vault
Custodian will also maintain a retrieval slip record and will provide a monthly
report to Documentation & Review Unit for follow up with respective branch /
business group.
 For within city movement of documents, RM/Branch representative arranges by
hand delivery of documents on case to case basis whereas for outstation branches,
approved courier services will be utilized. Branches/business segments/CAD Hubs
are to make sure that proper track of consignment should be kept in record, while in
transit.
b) Vault Operations
Islamic Banking
 CAD Hubs must be provided with a separate vault to maintain and preserve the
securities held by the Hubs under its custody on behalf of the customers. The
securities/document must be retained in the vault in fire-proof safes/cabinets.
Under no circumstances, securities and/or documents will be held outside the
safes/cabinets except when required with the approval of competent authority.
 The vault should have a built-in strong concrete/metal walls with a secured vault
door equipped with dual operation facility.
 A key register to be maintained at the Hubs to keep track of movement of keys.
 The charge / security documents are also used to release temporarily in original to
the BU / IBBs upon their requests for getting the CAD’s observations resolved, to
present before Sub-Registrar concerned for registration of the mortgage deeds etc.
Therefore, following steps to be taken while releasing the documents on temporary

basis:-
 Officer from Branch / business units will request respective CAD Hub specifically
mentioning valid reason, list of documents required, specifying date to revert
documents back to respective CAD Hub and nominate staff to receive documents.
 Vault custodian to maintain MIS of such cases [Temporary & Permanent] and
forward the same concerned unit of CAD Hub for follow up with business groups in
case of any delay.
32.3 Movement of Security (Release of Security Documents)
CAD Hubs being primarily responsible for completion and custody of securities will also
act as a controlling unit for Release of Securities. The Department will not initiate any
transaction at its own for release of securities and will seek written advice in this respect
from Relationship Manager/Branches/Business Units. The securities held by the
Department may be released under two circumstances i.e. where credit facilities are fully /
partially settled and where security is being replaced.
 Respective Branch/Business Group upon entire settlement of liabilities is to request

concerned CAD unit for release of securities along with approval of competent
authority.
 Respective CAD Hub is responsible for release /replacement of securities after
necessary due diligence & obtaining necessary confirmation from concerned
branches/business units to ensure Nil outstanding by obtaining screenshot as
generated through BAHL System.
 For within city branches respective CAD Hub will handover security documents to
RM / staff nominated by concerned Branch / Business Unit with proper
acknowledgement, while for outstation branches courier services will be utilized and
CAD Hubs to ensure keeping the courier slip of consignment in record.

Islamic Banking
 Vault custodian / Documentation & Review unit will prepare an IOM addressed to
respective business group, listing down all the details of security and documents to
be released.
 Security to be released from vault & DMA Module.
 Any task related to redemption of mortgage deed and revocation of any other
instrument to be undertaken by Business Groups.
32.4 Checking Points at CAD’s End:
The details of process flows for above respective modes will be as under:
i. Full release of security / security documents upon full and final settlement of
finance.
ii. Partial release of security upon partial adjustment.
 Credit Approval required where necessary and in ALL cases where partial release of
security is requested.
 Confirmation from BU / Branch regarding settlement of entire liabilities against
which security to be released.
 Confirmation required that release securities are not tagged with any other
customer's financing facilities.
 Mortgagor's Request for the release of security (i.e. Property).
 Customer's request for the release of specific security for ALL cases.
 Insurance Company Letter required in case of Theft Vehicle duly issued by
approved Takaful Vendor.
 Lien on TDR & or Account if any cannot be released by branches until or unless
prior consult of CAD Hub to be obtained.
 No outstanding amount under Charity head.
 Proper Safe Out of Security from Vault / DMA.
 Customer's Credit limits/Securities are completely cancelled/Matured /Terminated
in BAHL System.
 CAP [Customer's Advances Profile] showing Cancellation of Limits & NIL
outstanding.
 Compliance of other conditions as stipulated in the approval for the release of
security.
 Copy of FIR required in case of Theft / Accidental Vehicles.
 Separate documents required for Ijarah Termination / Settled cases.
Important Note:
In such cases if DAC is issued & valid at the time of releasing securities, all CAD Hubs
immediately callback DAC by notifying all concerned Operations Units, BUs & IBBs
through LONO / email.

Islamic Banking
32.5 Replacement / Substitution of Security
Where competent approving authority approves replacement/substitution of securities the

following should be ensured prior to release of existing security:
 Approval from competent authority should be in place.

 Substitute security arrangement should be accepted by the customer through
addendum Facility Offer Letter.
 Substitute security duly perfect in all respects should be in place.
 In case of property, original title and related documents along with Valuation, Pre &
Post mortgage legal perfection, EM / TRM should be in place.
 In such cases if the DAC is already issued, Documentation Unit immediately after
replacement of security will issue an addendum to the DAC for the new amendment
in security.
32.6 Cancellation of Security Documents
 Formal Approval must be held.

 Original Instrument not to be released and retain by CAD Hub Islamic for the
consumption of Audit. However, Can be released Subject to approval duly endorsed
by CCC.
 CAD Hub Islamic must retain "Cancellation Stamp" at their end and affixed the
same on the face of instrument.
32.7 Vacation of Charge Registered with SECP – Limited Companies
 For vacation of a segregated charge, Form 17 duly executed by the authorized

signatory of the company will need to be submitted with SECP.
 Before vacation of charge, company’s request duly signed by the authorized
signatory (ies) should be obtained.
 For vacation of charge/release of original charge documents to the customer,
approval from respective approving authority should be in place.
 Before vacation, it should be ensured that there is no outstanding / dues / Charities
with any Department of BAHL against such security.
 The SECP will register the vacation of charge within 30 days from the date of
documents.
 Before release of any original security/charge/financing documents, company’s
request mentioning name, value and date of the document duly signed by
Islamic Banking
authorized signatory (ies) authorizing a person to collect the required documents
from BAHL should be obtained. The authorized person should acknowledge receipt
of the documents on the authority letter in his favour as well as on the copy of
charge documents which is being released to him.
 No Other Bank's Charge shall be vacated by BAHL - CAD Hub Islamic.
 Released Security must be removed / vault out [if required] from DMA CAD Hub
Islamic.
32.8 Creation, modification and vacation of charge over assets of Partnership,

Proprietorship Firms and Trusts, Associations/Clubs
 Since there is no governing body where the charge over assets of Partnership,
Proprietorship Firms, Trusts, Associations and Clubs could be registered, respective
charge creating instruments duly perfected as discussed above should be obtained.
 For vacation of charge/release of original charge documents to the customer,
approval from respective approving authority should be in place.
 For release of original charge/security documents to firms/association, it should be
ensured that there is no outstanding / dues/ Charities with any Department of
BAHL against such security.
 Before release of any security/charge/financing documents, company/firm’s
request mentioning name, value and date of the document duly signed by
authorized signatory (ies) authorizing a person to collect the required documents
from BAHL should be obtained. The authorized person should acknowledge receipt
of the documents on the authority letter in his favour as well as on the copy of
charge documents which is being released to him.

Islamic Banking
LIMIT FEEDING
UNIT
33. LIMIT FEEDING UNIT:
Limits / Securities / Takaful / Insurance / Stocks Report Feeding:
33.1 Responsibility for limit feeding
Limit mark-upand Security maintenance /feeding will be managed by CAD Hubs Islamic
whereas Stocks & Receivable Reports will be controlled by BU / IBBs / CAD Operations /
CAD Hubs. Operation ill monitor to ensure that branches are feeding the same after getting
the formal approval and issuance of DAC from respective CAD hub. However, our IT
Division is working to enhance the existing Credit Module after which limit maintenance
will be completely transferred to CAD in due course of time.

Islamic Banking
All related information such as borrower’s basic information, borrower business code,
number of employees, e- CIB, Security codes etc. are to be fed by the IBB / CAD Operations.
System will generate the limit maintenance report, on daily basis, for the consumption of
respective CAD hubs monitoring. On the basis of this report, CAD hubs can ensure that
branches are feeding the limits, mark-up rates and Securities in the system strictly according
to the terms of approval and after the issuance of DAC by CAD. Its compiled position will
also be sent to Central CAD for information.-
33.2 Operational Activities to be performed at CAD Hubs
Feeding the approved lines for utilization by the customer within the time frame
prescribed in the regulations issued from time to time.
i. Limit Feeding as Per Approval for all Credit Facilities [Murabaha, Istisna,
Musawama, Running Musharaka, Ijarah, DM LCs, Acceptance, LGs].
ii. Limit Feeding of Consumer related financing at the request of IBBs.
iii. Limit Feeding of Staff Financing including Qadz-e-Hasana.
iv. Cancellation of all Approved Limits at the request of BU / IBBs.
v. Enhancement / Reduction in Limits amount at the request of BU / IBBs.
vi. Adjustment of Limits as per FX rates.
vii. Link / De-Link of Securities with the facilities.
viii. Up-dation of Profit Rates / Re-pricing of facilities.
ix. Maintenance of Expiry of Limits in BAHL System.
x. Collateral Capturing as Per Approval for Fresh / Renewal / Restructuring Cases.
xi. Feeding of Insurance Policies & Stocks Report.
xii. Feeding of Valuation Reports.
xiii. Rectification of IT Errors &
xiv. Others day to day transactions in the customer accounts.
33.3 Guidelines for Feeding of Insurance / Takaful Policies
 Enter Total Sum Insured in case Bank Al Habib Ltd is the sole beneficiary of the
Policy.
 In case Policy covers interest of our bank only but total sum insured is much higher
than limit / charge amount then CAD Hub will feed the charge amount.
 If other banks are also beneficiary / Mortgagees, share of our bank to be entered in
the system.

Islamic Banking
 In case policy covers the interest of multiple Bank's and the share of our Bank is not
defined therein than, the share of our Bank will be equivalent to the limit / facility
amount. This facility (ies) should be the one which security are primarily linked and
covered by insurance policy pertaining to i-e Hypothecation of Stocks, Machinery
etc.
 If policy cover the interest of multiple Banks but the aggregate Sum insured is not
adequately cover the interest of our Bank, than we determine total sum insured as
our Bank share and also ask business to cover the deficit.
 There are instances where single customer is availing finances from Islamic and
conventional both at same time, usually customer provides one insurance policy for
both finances, in this scenario both CAD Hubs should coordinate with each other
and feed insurance as per their share considering above mentioned formula.
33.4 Request mechanism for Limit Feeding by BUs / IBBs
 BU / IBBs forward their request for Limit Feeding via LONO containing details of
facility against which limits to be Fed including Pre-fix [Reflecting Customer's ID &
Account Number].
 Securities, Policies, Latest Stocks & Receivable Report, SBP Classification & other
related details must be updated in the system before requesting Limits.
 BU / IBBs also attached valid DAC & AFs with LONOs against which Limits to be
instituted in BAHL - System.
Important Note:
It is important to note that limit feeding activity shall be subject to issuance of DAC by
respective unit. Limits to be Fed till the validity of DACs subject to valid Deferral/
Valuation Report / Insurance & Takaful Policies on case to case basis.
Expiry of all OTT limits will be updated according to the Tenor / Expiry as mentioned in
Approval & DAC.
33.5 Authorization / Cancellation of Limits
 Head CAD Hub Islamic and or Authorized Personnel will check all transactions
(with reference to approval & issued DAC etc.) and if all in order will authorize the
all transactions.
 Limit feeding unit will take printout of System screen shots for record purpose
pertaining to aforesaid activities and send confirmation to BUs / IBBs regarding
Feeding / Non Feeding of Limits (in case of IT Error or etc.) in the BAHL system
accordingly.
Islamic Banking
 Request for the cancellation of financing facility will be received from BUs / IBBs
branch along with approval of competent authority and customer’s request. System
prints duly initialed by processor and authorizer to be retained for record purpose.
34. DISBURSEMENT MECHANISM BY CENTRAL CREDIT OPERATIONS

DEPARTMENT [CCOD]:
 "ISLAMIC BANING OPERATIONS ARE BEING PEROFRMED BY THE

BRANCHES AFTER ISSUANCE OF DACS AND FEEDING OF LIMITS IN BAHL
SYSTEM. HOWEVER, CENTRALIZATION OF ISLAMIC BANKING
OPERATIONS IS IN PROCESS AND ITS DETAIL MECHANISM WILL BE
FINALIZED IN DUE COURSE BY RESPECTIVE UNIT UNDER THE
SUPERVISON OF IBD".
 "ALL RELATED ANNEXURES PERTAINS TO AFORESAID ISLAMIC

BANKING PRODUCTS WILL BE OBTAINED AND RETAINED BY CAD
OPERATIONS ALONG WITH INVOICES AND RELATED DOCS FOR THE
CONSUMPTION OF RECORD, INTERNAL / EXTERNAL & SHARIAH AUDIT".
 “ALL ISLAMIC BANKING BRANCHES / BUSINESS UNITS MUST RETAIN A

COPY OF ALL FINANICNG AND SECUIRTY DOCUMENTS AT THEIR END
BEFOR SUBMISSION TO CAD HUB IB IN ORDER TO REFER THE SAME IN
THE AFORESAID ANNEXURES AT THE TIME OF DISBUSEMENT /
BOOKING OF DEAL”.

Islamic Banking
BANKING
CIRCULARS
Checklist
CAD Hub Islamic Banking Circular
Industry-wise Insurance Peril Grid
Approved Risk Limits of Insurance Companies for 2017-2018
Renewal of Insurance & Held Cover Letters

Islamic Banking
Insurance Rule - PPR
Pledge Inspection Circular
Centralized Auto Finance for Corporates & SMEs
Stamp Duty Slabs
Separate Deferral
List of Panel Advocates
List of Approved Evaluators
List of Approved Evaluators [Contact Details]
Muccadum Companies
Swap Procedure
Mortgage Formalities
LAF for SE & ME
LAF for Corporate & Commercial

Islamic Banking

Bahl - Ib Cad Procedural Manual - Final 2018

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CREDIT ADMINISTRATION MANUAL

ISLAMIC BANKING DIVISION

Approved By: Syed Zulfiqar Ali Head - CCAD

Reviewed By: Zaman Ahmed Head - CAD

Prepared By: Muhammad Farhan Manager - CAD

Bank Al Habib Limited - Credit Administration Department Page 3

Bank Al Habib Limited - Credit Administration Department Page 4

21.6 Government Departments 56 - 57

S.No: Particulars Page No.

Bank Al Habib Limited - Credit Administration Department Page 6

Bank Al Habib Limited - Credit Administration Department Page 7

Bank Al Habib Limited - Credit Administration Department Page 8

Bank Al Habib Limited - Credit Administration Department Page 9

2. OBJECTIVE OF THE MANUAL:

Key objectives of CAD Manual are summarized as follows:-

iii. To ensure compliance of Shariah Parameters in all day to day activities.

iv. CAD Procedures/processes must incorporate transparency and accountability.

3.1 Custody, Distribution & Access

4. GOVERNING RULES & REGULATIONS:

5.1 Small Enterprise (SE)

5.2 Medium Enterprise (ME)

Bank Al Habib Limited - Credit Administration Department Page 12

5.4 Corporate Banking

5.5 Clean Financing

Bank Al Habib Limited - Credit Administration Department Page 13

The over-all objective of the Credit Administration is to provide independent assurance to

7. RESPONSIBILITIES OF HEAD CAD ISLAMIC BANKING:

ii. To ensure proper controls and compliance of applicable rules, procedures,

iii. Manage day-to-day operations of the Credit Administration Department by

v. To ensure maintaining positive audit rating [Internal / External / Shariah] in all

Bank Al Habib Limited - Credit Administration Department Page 14

The primary scope of establishing Credit Administration Department (CAD) is to provide

v. All Financing & Security loan - documentation relating to transactions is scrutinized,

vii. To facilitate customer by pursuing Banking Regulations & Policies, Shariah

Bank Al Habib Limited - Credit Administration Department Page 15

CAD platforms are comprised of:-

a. CAD Hub Karachi

Bank Al Habib Limited - Credit Administration Department Page 16

Zaman Ahmed Zuberi

Salman Kamil Ebad Kamran

Muhammad Yousuf Ansari

Mariya Kulsoom Mariya Kulsoom

Bank Al Habib Limited - Credit Administration Department Page 17

11.1 Core Pre & Post Disbursement Formalities

i. Scrutiny of Approval to ensure that the same is approved by competent authorities

ii. Preparation of FOL / Security / Charge Documentation as per Approval [AF - 1, AF

iii. Review & Scrutiny of executed Financing / Charge/ Security documents

iv. Issuance of DAC (Disbursement Authorization Certificate) for Funded as well as

Similarly, Insurance/Takaful for mortgaged properties (constructed) should

To check the risks covered in insurance/Takaful policies submitted by the borrowers

Keep track of expiry of limits, borrowing documents, insurance/Takaful policies,

viii. To ensure completion of all formalities required in respect of borrower’s securities

Bank Al Habib Limited - Credit Administration Department Page 19

xv. To perform Operational Activities such as Feeding of Limits, Collateral Capturing,

xvii. Arranging/Assigning of valuation reports of fixed assets.

xviii. Release of Securities as per Approved/Defined parameters

In Short, No funded or non-funded facilities would be instituted without issuance of a

11.2 Miscellaneous Tasks

iii. Maintenance & Reconciliation of Stamp Paper Management.

Inspections of pledged stocks are regularly [30 - 45 Days /Quarterly] being